The Republicans in the House and Senate have grudgingly agreed that President Obama has the upper hand and leverage over them regarding increasing taxes on income over $250,000.00 a year. So politically, they have to respond with something more than demanding cuts in social spending that they know the American people won’t tolerate and the Democrats and President won’t agree to. So they have been hinting (for lack of a better term) that they will get back at the President and show who’s in charge by obstructing any increase on the Debt Ceiling.
If this sounds familiar it’s because we have been here before. In the summer of 2011 we had this same debate. The Republicans in Congress via the propaganda wing at FOX News and some disingenuous pundits in mainstream media, convinced many in the country that raising the debt ceiling meant more spending, thus adding to the ever-increasing debt. So they vowed to stop it. They threatened a refusal to vote to raise the ceiling unless the President agreed to substantial cuts to all “non discretionary spending” not related to defense with no increase in revenues at all. By doing this, they threatened for the first time in our history, to place the country in default.
As a result, on August 2, 2011 the President, after arranging a deal with Speaker Boehner on July 31, 2011, signed the “Budget Control Act of 2011.”
However, due to the rumblings and uncertainty that our government was functioning and whether he had the ability or willingness to pay our debt, on August 5, 2011, Standards and Poor lowered our nation’s credit rating from AAA to AA. This was the first time in our history that this had happened. In their report explaining the downgrade, Standards and Poor explicitly stated that this was due to the obstruction orchestrated by the Republicans, that demonstrated that we did not have a working government that could be relied upon. Although Moody’s and Fitch continued to rate our nation as AAA, the Dow plummeted 635 points (5.6%) in just one day as a result of the downgrade.
A few facts about the National Debt Ceiling that causes people confusion and all should be aware of:
1) All spending originates in the House of Representatives. It is then approved or modified in the Senate. After the House and Senate agree on spending and the means, or lack thereof, to pay for it, only then does it go to the President. The President only agrees to what Congress presents him. The national debt is the accumulation of spending of all Congresses (both Republican and Democratic) for decades.
2) Raising the debt ceiling only acknowledges that the United States agrees to make good on all the debt it has already accrued. It does not increase the debt in of itself; it merely says we will pay what we already owe. The bills have already been racked up, the credit card is almost maxed out and the money is owed.
3) Over time, our debt ceiling has actually increased in relationship to our growing GDP.
4) To not raise the debt ceiling is essentially telling our creditors that we probably will not be paying for what we already purchased. It’s like maxing out your credit card and even though you still have revenue coming in, instead of asking for a credit increase, you tell your bank you won’t be paying a dime on it.
5) We have never defaulted on our debt in our entire history. To do so would obliterate the “Good Faith and Credit” of the United States. Any money we tried to borrow would have extremely higher interest rates applied thus adding even more to our overall national debt.
6) Ronald Reagan increased the debt ceiling 18 times, George W. Bush increased it 7 times. Until this President came to office, the thought of not increasing the ceiling has never been given serious consideration due to the consequences such an act would create.
7) If we default on our debt, the U.S. Treasury would need to make good on our debt and would still have to come up with money for new bills coming through. This would require skyrocketing the interest rates the Fed charges banks and corporations to borrow money.
If we don’t increase the debt ceiling, spending would essentially need to be stopped to levels of revenue already coming in. Keep in mind that due to the consequences involved in stopping the spending, unemployment will increase thus resulting in less tax money coming in.
To stop the debt from increasing you would need to make dramatic changes in both revenue and spending at limits that would throw the country into depression.
Taxes would need to be raised on all Americans to levels not seen in over 60 years.
Military spending would need to be cut to levels not seen since before World War I.
Medicare, Medicaid, all Government agencies (VA, FDA, USDA, EPA, OSHA, etc) would need drastic cuts or elimination to keep the debt from going over the ceiling.
Cuts in veteran services, hundreds of thousands of government employees laid off and as a result, these people would no longer able to contribute to the overall economy due to their lack of employment.
So, by going into default, all Americans regardless of party affiliation, sex, race, religion, socio-economic class would be severely affected.
Unemployment would skyrocket to levels not seen since the Great Depression.
Small businesses would not be able to secure any loans, and interest rates for big corporations would skyrocket while at the same time revenues would be cut dramatically due to lack of business from the consumer class and government cancelling any deals with them.
The defense industry could cease to exist.
This is not a game, this is serious. By the Republicans once again stalling on agreeing to raise the debt ceiling they are already signaling to Standards and Poor, Moody’s and Fitch that we have an uncooperative government of obstructionist Republican and the Stock Market could take another dive, possibly worse than the one in 2011 affecting everyone who owns stocks regardless of party affiliation.
The mere threat of default carries severe consequences; actual default would destroy ours and the world’s economy to levels far worse than the Great Depression. This is what the Republicans in Congress are threatening to do for partisan political gamesmanship. It has no practical value in governance or the needs of anyone in the nation or world. It is petty and childish.
Regardless of your party affiliation, you cannot allow your representative to even consider such a move. It’s Russian roulette, and most of the chambers are filled.