Republicans deceive and endanger national debt ceiling
Every few years, it seems another argument pops up about raising the national debt ceiling. So let’s take a look at this often misunderstood macroeconomic metric. According to the Treasury Department, the “debt limit” (or ceiling) “is the total amount of money that the United States government is allowed to borrow to meet its existing legal obligations, including Social Security and Insurance benefits. illness, military salaries, interest on the national debt, tax refunds and other payments.
These “existing legal obligations” were contracted during the past administrations of both parties. They were duly promulgated by Congress and promulgated by the then president. But allowing an increase in the debt ceiling is not not give the green light to any political party tasked with spending taxpayers’ money on whatever their new favorites are.
The partisan rhetoric that raising the debt limit will give the other party a “blank check” to keep spending on their favorite policies isn’t just true, it’s dangerous talk. The alternative to raising or suspending the debt ceiling would be disastrous for the nation. If the federal government fails to pay its bills, especially its interest payments, the result on the US economy would be catastrophic. According to Moody’s Analytics, defaults on the federal debt would wipe out some 6 million American jobs, reduce stock prices by a third and reduce household wealth by $ 15 trillion. This is what a disaster looks like.
Now if you think I’m crying wolf, think back to when the Republicans played chicken with the debt ceiling during the administration of Barack Obama. You might remember that while the Republicans walked around and approved the debt ceiling increase at the last minute, the consequences of their madness came pretty costly for all of us. For the first time in history, Standard and Poor’s lowered the credit rating government from its highest rating of AAA to AA + because, according to S&P, the “efficiency, stability and predictability” of American policy-making and political institutions had weakened in a time of challenges. permanent.
Today we hear the same kinds of rhetoric. For example, in a recent email, Representative Ashley Hinson, who represents Northeast Iowa, proudly proclaims, “America’s credit card is on the max and the suspension of the debt limit until December 2022 essentially ignores the outstanding balance in our bank account which has already been depleted for over a year. At the same time, Democrats try to find every penny and penny under the couch cushions to spend on their radical agenda, and then they want to go after the taxpayers for some more. I’m not going to give them a blank check to keep spending for socialist policies. “
Notice how Hinson twists the truth about the debt limit. He is not It is true that the suspension of the debt ceiling will give Democrats “a blank check to keep spending on socialist policies.” The truth is, the debt limit suspension must be done not only to pay for Trump’s tax cuts, but also to make Social Security payments, not only to pay the salaries of all government employees, including the military, but also to pay all obligations already incurred by the federal government.
Raising the debt ceiling has almost never been a partisan issue, as Republicans have done in the last two Democratic administrations. It has been lifted or suspended more than 100 times with barely a glance since its inception in 1917.
What shall we do now? As of this writing, Democrats have added the increased debt ceiling to the Continuing Resolution Bill, which would effectively push the issue until December 2022, after the midterm elections. This bill, which will allow the government to operate until December 2022, has already been passed by the House. But, while this bill also contains emergency spending provisions for things like evacuating Americans from Afghanistan and helping the victims of Hurricane Ida, Senator Mitch McConnell said Senate Republicans would not support him, and Republican votes will be needed to pass it in its current form. McConnell suggested that Democrats instead include the debt ceiling provisions in a budget reconciliation bill, which they can pass without any Republican votes.
So, once again, the Republicans are playing chicken with the debt ceiling, a very dangerous game. The debt ceiling must be increased so that bills can be paid.
Hans Isakson is a retired economist from the University of Northern Iowa. He has published over 45 papers and taught at the University of Texas at Arlington, Washington State University, the University of Georgia, and the University of Wisconsin-Milwaukee. He lives in Cedar Falls.