Some nationally prominent politicians are saying that a congressional failure to raise the debt limit would not be so bad.
One is left to wonder what scale of disaster these people do find to be so bad. The Challenger space shuttle? The Titanic? Japan’s tsunami? Clearly, the daily disaster of millions of unemployed Americans isn’t so bad. Otherwise, the debt ceiling would have been raised by now.
It is possible some of these politicians really don’t understand what we’re dealing with. Every time one of them compares federal finances with household finances – arguing we should tear up the credit card and balance the checkbook and live within our means, just like families do – the intellectual dead end has been reached.
| Compromise near? Latest from the Associated Press |
The federal government is nothing like the family household. It is a very large, poorly run business with a micromanaging board of directors (Congress) and a weak CEO (the president).
The business is failing. Refusing to raise the debt ceiling is the equivalent of pre-bailout General Motors reneging on its commitments to pay its steel suppliers and fund its employees’ retirement plans.
Raising the debt ceiling is not like giving a new credit card to a spendthrift teenager. Congress already used the credit card. Now the Treasury Department is looking for a way to pay the bill.
Congress already appropriated a certain amount of money and set a level of tax collection that was too low to cover the spending it authorized. It did so knowing the Treasury Department would have to borrow to make up the difference. Treasury can borrow only as much as Congress authorizes. A combination of cynicism, politics, naivete and ideological zealotry has prevented Congress from authorizing more borrowing.
Since Congress has already committed the nation to pay things like Social Security and the salaries of its military without enough cash in the bank, borrowing is simply not avoidable. To say at this point that the government really should have managed its affairs better is at best disingenuous.
New Mexicans who would love to see a government default, and let the chips fall where they may, might want to remind themselves that thousands of people in our national laboratories, on our military bases, in our veterans health care facilities, in our retirement communities, and working for agencies as diverse as the Bureau of Land Management and Homeland Security are supported by the federal government.
The scale of the failure to raise the debt ceiling is made chillingly clear by the Bipartisan Policy Center. This is a Washington think tank where our retired U.S. senator, Pete Domenici, is hanging his hat, along with other former senators, such as Tom Daschle and Bob Dole.
The center did an analysis of federal cash flows. It estimates that between Aug. 3 and Aug. 31 the government will take in $172.4 billion and has already been obligated by Congress to spend $306.7 billion. That means Uncle Sam is short $134.3 billion to pay the nation’s bills during the month of August, unless Congress raises the debt ceiling by Aug. 2.
So whom does Treasury pay and whom does Treasury stiff? The Bipartisan Policy Center explores some possibilities.
With $172.4 billion or so, the United States can:
n Pay the interest on the debt the nation has already incurred; Social Security, Medicare and Medicaid benefits; the vendors who sell to the Defense Department (but not the salaries of our military); unemployment insurance benefits; and nothing else.
n Or it can pay the interest on debt and the Social Security, Medicare and Medicaid benefits; food and nutrition services and other temporary aid to the poor; Veterans Affairs programs; special education grants; tuition assistance; and nothing else.
n Or it can pay the interest, the benefits, unemployment insurance benefits, and veterans programs; the refunds the Internal Revenue Service owes to businesses; our active-duty military and federal employees; special education grants and tuition assistance; and nothing else.
The Social Security Trust Fund, from which benefits are paid, by law puts its money into special debt securities issued by the Treasury. Absent a debt ceiling increase, trust fund monies can’t be invested in new debt, and the pledge of the full faith and credit of the United States to pay back to Social Security the money it has borrowed will become impossible to keep as time goes by.
You can craft your own whom-should-we-stiff strategy at the center’s website, www.bipartisanpolicy.org.
If the prospect of suddenly unemployed federal workers in every state and unpaid military personnel under fire in Afghanistan doesn’t impress Congress, perhaps this will: In September 2008, the Lehman Brothers’ bankruptcy filing cratered the global economy because suddenly no one knew if the institutions making up the world’s financial systems could or would honor their obligations.
Lehman Bros. had $639 billion in assets, about as much as it takes to run the government for slightly more than two months. It had debts of $619 billion. The failure of a firm that was in the black to the tune of $20 billion nearly destroyed the global financial system. You don’t want to see what happens if Uncle Sam becomes the next Lehman Bros.
UpFront is a daily front-page news and opinion column. Comment directly to Winthrop Quigley at 823-3896 or wquigley@abqjournal.com. Go to www.abqjournal.com/letters/new to submit a letter to the editor.
— This article appeared on page 19 of the Albuquerque Journal
Reprint story -- Email the reporter at wquigley@abqjournal.com. Call the reporter at 505-823-3896
