January 4, 2011
A Couple of Questions on the Debt Ceiling
What's the point of a debt ceiling if Congress is going to spend in such a way as to make changing it obligatory? And shouldn't it require a vote to change the debt ceiling before enacting policies that will certainly exceed it?
The federal debt is limited to $14.3 trillion, but the debt now stands at nearly $13.9 trillion and is growing daily. Congress last raised the debt ceiling in February 2010 and is expected to consider raising it again as early as March. ...Austan Goolsbee, the chairman of the White House Council of Economic Advisers, said that refusing to raise the debt ceiling would essentially push the country into defaulting on its financial obligations for the first time in its history.
"The impact on the economy would be catastrophic," Goolsbee told "This Week" on ABC. "That would be a worse financial economic crisis than anything we saw in 2008."
I don't believe Goolsbee's analysis; the U.S. government and the U.S. economy are not (yet) synonymous. Holding legislators and executives to a maximum budget — and the debt ceiling is a fail-safe beyond an actual in-the-black budget — will just require them to change their policies and reduce their waste. If they refuse to do these two things, then they are the ones causing the catastrophe.
There needs to be a provision in place that puts lawmakers on the hot seat for both raising the national debt (by tying that to actual structural deficit reduction) and for hitting the debt ceiling (criminal prosecution for negligent fiduciary responsibility). Imagine if you had someone with power of attorney handling your financial affairs and they drove your finances into the ground simply by adding more credit card debt at every opportunity instead of making necessary changes to spending patterns. Lawmakers need to be held accountable for their actions. Their bad behavior will not change until it effects them personally.
Posted by: MadMom at January 4, 2011 4:29 PMNo country with a Debt-GDP ratio permanently stuck over 100% has thrived.
See Japan. See Greece. See Zimbabwe.
The US will hit that mark by spring.
Happy New Year.
"refusing to raise the debt ceiling would essentially push the country into defaulting on its financial obligations for the first time in its history."
An interesting choice of words. Just exactly what financial obligations would the government to cdhoose to default on. Are we talking bond payments, or payroll?
Assuming that the defaults would not not be equaL across the board, it would be interesting to see which obligations they chose to default on. I suspect that it would be those defaults that would grind the taxpayers the most immediately, for instance Social Security, rather than payroll. I think it would be the usual "we'll have to reduce police and firemen", writ large.
It goes without saying that it is "spending" not a debt limit that may force defaults for "the first time in history". It is my memory, rather than well documented fact, that the U.S. defaulted on obligatins in the "panic" of the 1870's.
Posted by: Warrington Faust at January 5, 2011 12:07 AM