January 06, 2011

An Honest Question About the Debt Ceiling

So we seem to be facing a problem:

Treasury Secretary Timothy Geithner warned congressional leaders Thursday that the government could reach its borrowing limit by spring and failure to raise it could affect millions of American jobs.

The government will reach the limit between March 31 and May 16, Geithner said in a letter to congressional leaders. Not increasing the $14.3 trillion debt limit could lead to job losses, he said.

Inaction could drive up interest rates and make it more costly for U.S. companies to borrow money.

Geithner's warning is directed chiefly at Republicans, who are vowing to block an increase in the debt limit and use the fight to restrain government spending.

If we refuse to raise the $14.3 trillion debt limit, interest rates could go up and jobs could be lost in an already depressed economy. I get that.

But which is worse? Hitting our debt limit, or raising it again, only to hit it in the near future with even more catastrophic results? It would seem better for the nation to run out of money we frankly don't have now, instead of piling up the debt and defaulting on it later, hurting both us and our creditors in other nations that much worse when we finally do default, which we assuredly will as we keep kicking the proverbial can down the road, borrowing far more than we have the financial resources to repay.

At this point, refusing to raise the debt ceiling and dramatically cutting government spending would seem to be the only logical and fiscally responsible action out Congress can take. Continually raising the debt we owe to other nations would seem to be a clear and present danger to our economy and Republic.

What say you?

Posted by Confederate Yankee at January 6, 2011 02:38 PM

I think it would be interesting to raise the debt limit just enough to match whatever temporary budget they put together for the balance of the fiscal year, so they would have to deal with the debt limit at the same time they're dealing with the budget for next year. It would be a wonderful thing to tie those discussions together every year.

Posted by: RRRoark at January 6, 2011 07:32 PM

It is all a load of crap - and a red herring. Since 10/1/2010 the 30yr. treasury is up 26% and the 10yr. treasury is up 51% - and we haven't even raised the debt ceiling. You ain't seen nothing yet - folks: rates are going up and inflation is around the corner. There will be no avoiding it - the only question is will it be as bad as the Jimmy Carter era or not??? CY, the answer to your question is play hard ball and brinksmanship with Obama - paint him into a corner to make meaningful cuts to raise the debt ceiling - which is not the end of the world if we can get back to 2008 or 2006 spending levels.

Posted by: mixitup at January 7, 2011 12:11 AM

First: does anyone actually believe Congress will be more careful about the money they spend in the short and long-term future if the Republicans agree to raise the debt ceiling this time? Because they keep saying they'll be more careful next time, and yet they keep finding more "emergencies" to spend money on... I mean, how many times have they had to raise the debt ceiling in the past two years?

Second: if the debt limit will be reached sometime in early to mid spring, why are we talking about this NOW? Can't it wait until then? And maybe in the meantime they can... oh, I don't know... maybe try ACTUALLY cutting spending, just to prove they're truly serious about it this time? Go ahead and furlough some federal employees who are non-essential; give them Fridays and/or Mondays off. Tell agencies and departments that they're not going to get to hire any new employees until our debt starts coming down.

When someone with a poor credit rating racks up unmanageable debt and reaches their limit, the credit card companies don't just say, "Hey, it's okay. We understand... so we're going to increase your credit limit." So why are we doing it to our out-of-control federal government?

Finally, many moons ago, I worked as a subcontractor for the federal government, as a travelling court reporter for the NLRB. And every year, starting around June or July, we'd experience a slowdown, which was a direct result of the NLRB running low of funds as the end of their fiscal year drew near. So we'd see cases be postponed until after October 1, or they'd simply settle before the case went to a hearing.

What I'm suggesting is that DC isn't going to grind to a screeching halt because they suddenly don't have any money. Yes, people might have to sit at home for a few weeks, but hey... maybe the government employees should get to enjoy a little "funemployment" like the rest of us are having to put up with. It's not like it'll be permanent for them or anything...

Posted by: elaine at January 7, 2011 12:15 AM

The only real cure is to slash government spending in half (at least).
Dismantle the departments of agriculture, energy, education, and several others, strip the IRS to maybe 10% its current size and strip the federal tax code to match (a third of federal tax income goes towards running the IRS, something tells me there has to be a better way), reduce the house and senate staff by 2/3, the white house staff by half (any member who wants more staff can hire them out of his own pocket), scrap DHS entirely.
The money saved can be used to double the budget of DOD in order to increase the strength of the armed forces, and still cut the federal budget by 40% while cutting the deficit (through the more efficient IRS).

Posted by: JTW at January 7, 2011 02:54 AM

What I find striking is that Geithner is now couching his warnings in terms of jobs -- conforming, oddly enough, to the New! Improved! Obama mantra. From now till election day 2012, everything Democrats push will be about jobs, jobs and more jobs. Repealing Obamacare will cost jobs..... Restraining the EPA will undercut green job creation.... Unpatriotic corporations must stop hoarding billions in cash when they could be putting America back to work..... Downsizing the Federal Gov't? Job killer!

Posted by: JM Hanes at January 7, 2011 11:12 AM

The claim is that the debt ceiling is for money already committed and must be appreciated now to meet this obligations. How about this, look into ALL of the obligations and cut ALL of them for the remainder of the year to prevent having to raise the ceiling! Is there any contract that cannot be reduced by 10% or more for this short period of time? Cannot the federal workers ALL take a 10% pay and benefit cut? Bring out the big easel and put all of the big ticket items on it and let the public see why we HAVE to raise the debt ceiling and what it's for.

Posted by: inspectorudy at January 7, 2011 05:34 PM

Either debt spending is wrong, or it isn't. If it is, then raising the ceiling gets more debt spending.

I don't get to spend money I don't have - my tool and servant (gov) should have the same limitations.

And nothing worse will happen than what SHOULD have happened in 2008 when TARP was introduced and passed - and should never have been.

Posted by: Tracy Coyle at January 9, 2011 04:14 AM