Political column: Debt ceiling agreement necessary
Published: Monday, October 14, 2013
Updated: Monday, October 14, 2013 23:10
I am sure by now that anyone who pays attention to our Congress is utterly and unequivocally fed up. The inaction and stalemate that has lead to the first government shutdown since the last one ended in Jan. 1996, is leading us, again, to a potential “doomsday” scenario—a default on our national debt.
There has never been a default in the 237-year history of the United States. It did not happen when we were a struggling new nation and it did not happen when we suffered through the Great Depression. Today, our country is at risk of defaulting for the second time in the last two years. In August 2011, Congress came within hours of the deadline to extend the debt ceiling, a move the markets and credit agencies did not appreciate in the slightest.
This threat of default caused the Dow Jones to drop 600 points in a day, one of the largest drops in its history. That was just because of the threat of default. After the debacle of 2011, the U.S. credit rating dropped for the first time in our history, increasing borrowing costs across the board and damaging the image of the United States across the world.
A misconception about the debt ceiling is it lets Congress generate new debt. In reality, it allows Congress and the president to finance existing debts already incurred by past and current administrations. To put it in layman’s terms, it means paying the bills. Bank CEOs, such as Goldman Sach’s Lloyd Blankfein, are also expressing concern over the debt limit saying that not raising the limit should “not even be considered a viable option.” Raising the debt limit should be a formality, not a weapon used to force some partisan agenda.
The effects of a credit default are massive and not isolated to the United States. A global market crash is a very real possibility. U.S. treasury bonds are one of the safest investments to make in financial markets. They are used as collateral and set a benchmark for other interest rates, such as mortgages. If there is a default, the confidence investors have in these bonds will downright collapse which could severely disrupt markets.
Payments out of Social Security, Medicare and other government agencies could be in jeopardy as well if the borrowing limit is not reached. Social Security, Medicare recipients and active military duty payments scheduled between Oct. 17 and Nov. 1, are in danger of being delayed if there is no deal on the debt limit.
Lastly, the negative effect this debate places on the image of the United States around the world is embarrassing. It portrays us as being incompetent and negligent. The United States has the largest economy in the world. For there to even be a consideration of defaulting is an anathema.
Debt, deficits and spending are all important issues and they all must be dealt with, but to use the full faith and credit of the United States as a means to cut them is akin to cutting off your nose to spite your face. This entire debate is completely removed from reality. Factions in Congress need to cool off and govern properly to ensure the economic strength of the United States.