By Trevor Law
According to the U.S. Treasury Department the United States government will run up against its borrowing limit or “debt ceiling” on November 3rd and default. What does that mean, and who is to blame for why we will come so close is a much debated question that actually has a very easy answer. The debt ceiling is how much money the federal government can borrow to pay its bills. So in effect it is going deeper into debt to pay for things like roads, the military, education, etc.
If the government were to default it would only be a partial default. It is still receiving revenue so it could still pay some of its bills. However since it is clear that the government wouldn’t have some money coming in, things that are less essential would get delayed, while it is possible things like social security checks would be late it would most likely be road construction, education funding, certain aspects of the military and security, national parks, and anything else not a mandate, or something that is required of national security. However the very first thing that would be payed is interest payments and bonds. It is unconstitutional (under the full faith and credit clause) for that to not be payed so treasury would be required to pay that before even something like combat pay.
“But, doesn’t the federal government need to live within its means? I mean if the government can’t pay for things then shouldn’t it just not budget for them, or raise revenue?”
If you have thought this then you should feel proud because this makes you smarter than the Republicans in Congress. Unfortunately they have been unable to pass a budget in the House at a surplus so instead of simply trying to find a way to do this they play budget brinkmanship that has profound ramification for the country. This time around it is Planned Parenthood, the time before it was Obamacare, the time before that was 66 billion dollars in budget cuts. Never mind that Republicans walked away from a deal that would’ve saved a lot more money.
You see, making a budget is like, super super hard, and you have to get everyone in your party to agree with it, it is even harder to do when Republicans demand an increase in military spending, and lower taxes, while Democrats take Social Security and Medicare off the table.
As you can see, if we take out healthcare, defense, and Social Security, and we are cutting taxes then that only leaves discretionary depending. National parks, Federal Highways, Air Traffic controllers, any federal funds for education, would have to be completely gutted. While many Republicans would undoubtedly cheer if these programs were removed, if they did so it would cause a huge public outcry as people would lose jobs, and benefits. Since the Republican Party refuses to actually do this we keep playing budget brinkmanship. The Federal government hasn’t really passed a new budget in a long time. They have only been passing slight modifications to the old budget.
While Republicans have been tying things to passing a budget or the debt ceiling, the real reason for a lot of this is because the GOP is so dysfunctional that they can’t even agree on a position to oppose Obama and the Democrats on, so instead they find something every Republican can agree on and hold the federal government hostage unless they get what they want, and worst case scenario in their minds is that some programs they don’t thinks should exist anyway gets delayed and then they get to complain about how said program doesn’t work. It really is a nice tidy circle of nonsense that lets them pretend to govern, without actually doing so.
“But Trevor, you are being a bit unfair! I mean you are blending the government shutdown with the debt ceiling hike and that isn’t really fair. I mean they are two completely different things.”
I would agree, but the GOP claims to care about cutting the budget, but a key part of that has to be approaching Democrats and the President and not taking anything off the table, and the same would have to be true of Democrats. So if the GOP would actually try this, they might actually find themselves cutting the government in a responsible way, and would never have to raise the debt ceiling. “Yeah but you just said Democrats keep taking things like social security and healthcare spending off the table. How do you know Democrats are willing to accept that?” Well while I’m unsure about Congressional Democrats, I know President Obama is willing to for a fact. He has put Social Security on the table before and would be willing to do so again. Also, parts of Obamacare need a touch up and does need changes, if Republicans approached the President and offered those changes they might be able to get cuts in Healthcare spending, something Congressman Paul Ryan has aggressively fought for. The overwhelming point of this is that Democrats would be willing to work with Republicans on closing the deficit and making the debt ceiling unneeded but Democrats don’t have a partner to dance with.
“O.K. fine, but then why would a partial default be so bad? If Washington won’t live within its means isn’t the only way to do so?”
That is like saying you should buy a more fuel efficient car and the best way to do so is drive your old one into the ocean. The Federal government has already agreed to pay for these things, by not doing so we would be defaulting on a bill for the first time in U.S. history, nevermind what that would do the bond market and thus the global economy, think of what it would do to interest rates! If creditors starting worrying the U.S. won’t pay them back, it could very well cause the interest the federal government pays to increase exponentially. If that occurred we would be facing an even larger deficit and then even more panic followed by higher interest rates. It would force us into a cycle similar to Greece were the government is forced to cut deeper and deeper, pushing the country deeper and deeper into a depression.
“Oh…so you are saying it would be better for Washington to pass a really stupid budget that fixes nothing, than do partial default.”
Yes, but it would be way better to just do a freaking budget that actually addresses long term issues. This is why the debt ceiling fight is so absurd and why I want to throw something at the GOP’s head when they whine about having to pass it. If the GOP doesn’t want to raise the debt ceiling, or fail to raise the debt ceiling and be responsible for the worst fiscal calamity in U.S. government history than that would actually be a choice to govern, but since that doesn’t seem to be possible because they can’t even choose a Speaker of the House we are once again on the brink a monumentally stupid cliff. Apparently when the GOP talks about small government, they really do want to burn it all to the ground.