Within two weeks, if Congress does not approve an increase in the debt ceiling, the United States will default on its obligations and lose its Triple-A credit rating. The government’s failure to pay its bills on time will end whatever prospect might still exist for a robust recovery and open up a Pandora’s box of severe economic woes. The country needs this like it needs another Great Depression.
None of this is fanciful imagining or hyperbole.
Standard & Poor’s says that failure to allow the federal government to make good on its debts would produce “detrimental and long-lasting” effects. Practically every other impartial analysis agrees that default is a truly bad idea with grave consequences. If the country that backs the world’s most reliable currency can’t pay its creditors, all bets are off.
Why then can’t the government raise the ceiling? The answer, in a word, is politics. Rotten politics.
That became obvious when President Obama offered a plan to cut up to $4 trillion in the federal debt over a period of years in exchange for an increase in revenues — tax increases or tax reform, or a combination of the two. And the GOP turned him down. No new taxes, no way.
This absolutist position has turned what started out as a useful exercise in budget balancing into an absurd political melodrama with dangerous implications. Republicans deserve credit for forcing Democrats to pay attention to the oceans of red ink on the federal government’s books, but the inability to make a deal even with a strong offer on the table is reckless.
What could convince the nay-sayers to wake up to reality? Ronald Reagan, who as president had his own problems over the debt ceiling back when Democrats controlled Congress, would be appalled by this spectacle. In 1987, chastising Congress for failure to act on the urgent need to raise the ceiling, he said, “The United States has a special responsibility to itself and the world to meet its obligations. It means we have a well-earned reputation for reliability and credibility — two things that set us apart from much of the world.”
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