· January 9, 2013

Three reasons debt ceiling politics are bad for Ohio, America

Now that the fiscal cliff is past, GOP leaders in the U.S. Congress are threatening to create another budget catastrophe – blocking an increase in the nation’s debt ceiling. Never mind that the debt ceiling debate is about money Congress itself has already authorized to be spent – some members and senators are willing to put the nation’s entire economy at risk to score political points against the president. Federal law requires Congress to authorize the amount of debt the nation may take on when it borrows for programs from defense spending to Head Start. When the country bumps against the current debt limit which was voted on by Congress, we’ve reached the debt ceiling. Since WWI, when the current was instituted, Congress routinely increased the debt ceiling dozens of times. In just the last few years, far right Republicans in Congress – and there are more of them now due to gerrymandered electoral maps throughout the country – have used the debt ceiling vote to make a point. In 2011 they tied Congress in knots for weeks over this housekeeping vote. Ultimately, the U.S. credit rating was lowered for the first time in history and a so-called Super Committee of members of both Houses struck a deal with President Barack Obama which eventually lead to the fiscal cliff and across the board cuts in defense and domestic spending programs. Sen. Lindsey Graham, R-NC, once a Senate moderate but moving steadily to the right as his election approaches summed up GOP thinking on the debt ceiling yesterday on CBS’ Face the Nation:

But without spending cuts attached to the increase, Graham said he couldn’t support the debt limit increase, no matter the urgency. “I believe we need to raise the debt ceiling, but if we don’t raise it without a plan to get out of debt, all of us should be fired,” Graham said. “If you raise the debt ceiling by a dollar, you should cut spending by a dollar. That is the way to go forward,” he added. (CNN)

The Center on Budget and Policy Priorities’ Paul N. Van de Water wrote last week about the compelling reasons why the debt ceiling should not become part of Washington’s hyper-partisan political debate. He gets specific on three reasons:

1. Federal interest costs would skyrocket – and investor and consumer rates would rise as well. The federal government is currently borrowing money at less than 1% – those days would be long gone and our debt problems would cascade as the ‘full faith and credit of the U.S.’ was called into question.
2. How about an immediate 25% across the board spending cut? When our credit is impaired, U.S. weekly bond sales don’t attract buyers, hence there is no or little money. No matter what you believe about federal spending, across the board, unplanned cuts put our nation’s security and the safety net at risk.
3. There is still a Too Big to Fail Problem and many of the mega banks and systemically important national and international financial companies are heavily invested in U.S. Treasuries. From one day to the next those investments go from being sound to suspect and there would be a potential global unwinding which would do nothing but exacerbate every other problem and put the financial system at more risk than what we experienced in early 2009.

There are problems in Washington and there are priorities held by the American people. Congress’ job is to align the two and do what’s best for the country. Putting the entire financial system at risk over ideology is not patriotic and rather than solve fiscal problems, they would be made be worse.