In the next few weeks, Congress must decide whether to raise the debt ceiling. Under law, the debt ceiling limits the U.S. Treasury's authority to borrow money to pay for decisions already enacted by Congress and the president. In other words, the government needs Congress's approval to raise money to pay its bills.
If Congress fails to raise the debt limit, America will be in default. In 2011, the rancorous debate over raising the debt limit caused bond-rating agencies to downgrade America's credit. Though the debt ceiling was raised, the government (i.e. taxpayers) had to pay higher interest on money it borrowed.
The near crisis also had an adverse affect for America in the global markets.
So here Americans are again, after surviving the end of the world, supposedly predicted by the Mayans, and after avoiding the fiscal cliff, on the verge of yet another financial crisis. The fact that Republicans would use raising the debt ceiling as "leverage" to secure deep budget cuts, largely in entitlement programs, is irresponsible.
In his appearance on ABC's This Week Sunday, Senate Minority Leader Mitch McConnell ruled out additional tax increases as part of a debt ceiling or deficit reduction deal. "That's behind us. Now the question is, what are we going to do about the biggest problem confronting our country and our future? And that's our spending addiction. It's time to confront it," Senator McConnell said. "The president surely knows that. I mean, he has mentioned it both publicly and privately. The time to confront it is now." Senator McConnell indicated he would not approve action on the debt ceiling without sizable budget cuts.
But, in his weekly radio address, the president, who was able to get Congress to pass tax increases on high-income earners, was adamant about not using the debt ceiling as a bargaining chip. "One thing I will not compromise over is whether or not Congress should pay the tab for a bill they've already racked up," President Obama said. "If Congress refuses to give the United States the ability to pay its bills on time, the consequences for the entire global economy could be catastrophic. The last time Congress threatened this course of action, our entire economy suffered for it. Our families and our businesses cannot afford that dangerous game."
America is in the midst of a slow recovery. Unemployment is still unacceptably high, and consumers are wary of the future. Yet who can blame them given Congress's erratic behavior. Most Americans feel a responsibility to pay back the money they owe in a timely manner. They full well know the consequences of failing to do so, including having their credit rating reduced.
If Congress fails to act it risks another downgrade of U.S. Treasury bonds. Brian Kessler, of Moody's Analytics, told MarketWatch, "For the last 60-ish years, U.S. Treasury bonds have been the foundational rock of the entire world financial markets. A second downgrade could be like an earthquake on that financial rock." He added, "I'm very nervous that people in Washington don't really take that seriously enough."
In the 2011 debt ceiling debate, The Economic Policy Institute said that failure to raise the limit would create, "a massive shock to the economy." It further warned, "Social Security checks would be cut, doctors would not be reimbursed in full for seeing Medicare and Medicaid patients, and private contractors doing business with the federal government would not be paid." Ditto for 2012.
Making matters even more complicated are upcoming debates over the "sequester" spending cuts to defense and domestic spending, agreed to as part of the 2011 debt ceiling deal, and a stopgap bill that will likely be needed in March to keep the government operating.
Congressional Republicans must act responsibly by putting country ahead of partisan politics. They must vote to raise the debt ceiling. American cannot endure another self-inflicted wound from Congress.
The U.S. Constitution defines the powers it grants Congress. They include: "The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States." If Congress fails to raise the debt ceiling it will weaken the country and fail to provide for the general welfare of the United States.