Up until now, I haven’t felt like it was important to comment on the situation with the US debt ceiling. My understanding had been that the entire thing was just political theater and that both parties would eventually shut up, realize that they all had too much to lose, that there were too many interests in the country which needed the issue to be resolved, and do the right thing.
While I’d still bet money that this whole thing eventually resolves itself, I find the fact that I need to reconsider that at all appalling. Let’s review:
- This is not about spending/debt. I am a big believer that the US government needs fundamental tax and spending reform and a big dose of efficiency. But that is not what is at issue here. Don’t let anyone fool you – the money that the Treasury is asking for is not the federal government’s way of trying to spend more money without getting proper permission. The permission has already been given. The spending has already been approved by Congress. This is the logical equivalent of your boss ordering you to buy something but not giving you the company credit card to do it – i.e., so stupid its not worth arguing about. It even begs the question: why, other than petty politics, do we have a debt ceiling?
- The results of not raising the debt ceiling could be catastrophic. Don’t listen to anyone who says that not raising the debt ceiling in time would be minor: the truth is nobody knows what could happen. But here is what we do know: much of global finance/economics is tied to the strength and reliability of the US dollar and the US government’s willingness and ability to pay off its debts. If there is a disruption in that, even if only temporarily, there could be enormous short-term consequences as interest rates and global exchange rates if those assumptions fall apart, and there could be even more disastrous long-term consequences for the US when lenders realize that petty politics can push the US into breaking its promises and require much higher interest rates and much more onerous terms the next time the US needs to borrow money or is looking to do any sort of arrangement.
A country’s debts and promises are a matter of its reputation and trustworthiness and, in my opinion for a democracy, a reflection of the moral character of its citizenry. I am disgusted that there are Republicans who want to lay on conditions for doing what is best for the US’s reputation and for doing what is best to avoid a potential financial catastrophe in the middle of a slow economic recovery. And, I am disappointed that the Obama Administration played along by entering into such negotiations.
We have turned what should have been a quick and obvious decision into another forum for political grandstanding and posturing, and I hope the politicians in Congress hear me when I say, “Raise the Debt Ceiling, Stupid!”