Liberals such as the Fed’s chairman Ben Bernanke, Treasury Secretary Timothy Geithner, and Democratic leaders in the House and Senate, are predicting utter economic chaos if the debt ceiling is not raised. But history shows that in 1985, 1995 and in 2002 Congress delayed raising the debt ceiling for months without an Armageddon-style economic meltdown. When the statutory debt limit is reached, the government isn’t required to pay off the entire debt at once -- it simply isn’t allowed to increase its borrowing. To avoid a default the Treasury Department uses accounting methods in order to to prioritize interest and debt payments to keep things running relatively smoothly with only a few short-term cash flow problems to deal with. However, these "accounting methods" only serve to put off the problem for a few months.
Nonetheless, the goal here isn’t to keep raising the debt limit and paying the interest on a growing gargantuan debt that already costs every man, woman, and child in the country $45,898.36. The goal is to eliminate federal deficits and to begin paying down the national debt with fiscally disciplined and responsible budgets that drastically reduce federal spending.
Although a recent CBS poll showed that 63 percent of Americans oppose an increase in the national debt limit, Treasury Secretary Timothy Geithner has assured us that Congress will raise the debt limit. Still, Tea Party-aligned Republicans insist that they haven't made a deal with the Obama administration to increase the debt limit.
Even though pundits tell us that the Republicans will "cave" and deliver sufficient votes to raise the debt limit, it's not over until the vote occurs. Geithner has announced that he is using creative accounting methods that will prevent any bad effects from exceeding the debt limit until August 2, but that Congress really must vote to approve an increase in the debt celing by then. So, this leaves June and July for political posturing and maneuvering. In fact, House Republican leaders are planning a vote in the House next week on a "clean" debt limit increase of $2.4 trillion. This is termed a "clean" debt limit increase because the bill that has been introduced by Ways and Means Chairman Dave Camp (R-Mich.) does not provide the spending cuts demanded by most Republicans and some Democrats. This bill, which is fully expected to fail, would provide Republicans the opportunity to vote "no" on a clean debt limit increase, and provide political cover for enough Republicans to vote "yes" later to ensure passage of a debt limit increase with promises to reduce spending by x dollars and/or balance the budget in y years.
Although it appears unlikely to happen, it is still possible for Congress to vote against any increase in the national debt limit and to begin immediately to cut federal spending sufficiently to balance the budget and eliminate any further federal deficits. This would be very difficult politically and cause all kinds of problems for people whose programs would be reduced or eliminated. However, not immediately balancing the budget would also cause all kinds of problems for people who are harmed by a rapidly devaluing currency.
To get an idea of the magnitude of the deficit problem, consider that in fiscal year 2010 the federal government took in $2.162 trillion from taxes and other income and spent $3.456 trillion on entitlements, discretionary spending, interest on the national debt, etc. The deficit for 2010 amounted to $1.294 trillion. If Congress had balanced the budget in 2010, it would have had to reduce federal spending by about 37 percent across all programs. That's a lot of pain, but continuing to have trillion dollar deficits will also inflict a lot of pain in the form of the devaluation of the dollar (decreasing the value of our salaries, wages, investments, retirement income, insurance, etc) and the loss of national independence associated with continued borrowing from foreign nations (only if they'll even agree to loan us more, of course).
The Republican Study Committee, a group of 175 self-described fiscal conservatives in the House, has proposed a plan to cut federal spending by $380 billion in fiscal 2012. While they describe this as cutting the deficit in half, in the context of our current series of $1 trillion plus deficits, the math doesn't come out right. Nonetheless, this would be a step in the right direction. However, why not just balance the budget immediately and cut the deficit to zero?
Contact your Senators and Representative and let them know that the only acceptable and honorable thing to do for the country is to vote against any increase in the national debt ceiling, then immediately begin slashing federal spending to reduce our federal deficit to zero in fiscal 2012. They should use the Constitution as a guide and reduce or outright eliminate unconstitutional programs.
No Debt Ceiling Increase: Balance the Budget Now!
UPDATE, May 31, 2011: As expected, the House voted down H.R. 1954, a "clean" bill to increase the national debt by $2.4 trillion, by a vote of 318 "nays" to 97 "ayes." Voting "nay" were 236 Republicans and 82 Democrats. Voting "aye" were 97 Democrats. According to Treasury Secretary Timothy Geithner, Congress has until Aug. 2 to approve an increase in the debt ceiling before bad financial things begin to happen for the federal government.