{"id":1202,"date":"2011-05-12T13:38:41","date_gmt":"2011-05-12T18:38:41","guid":{"rendered":"http:\/\/www.billlosey.com\/?p=1202"},"modified":"2011-05-12T13:38:41","modified_gmt":"2011-05-12T18:38:41","slug":"the-debate-about-our-debt-ceiling","status":"publish","type":"post","link":"https:\/\/billlosey.com\/knowledge-center\/the-debate-about-our-debt-ceiling\/","title":{"rendered":"The Debate About Our Debt Ceiling"},"content":{"rendered":"

Congress must think (and act) fast. <\/strong>In the middle of May, <\/strong>the national debt limit of $14.3 trillion will be reached. This means the federal government must increase the debt ceiling sufficiently to cover U.S. obligations through the end of 2012. It will undoubtedly happen, but not before a loud round of partisan politics is finished.<\/p>\n

What does the public think?<\/strong> In April, a CBS News poll showed that 63% of Americans opposed raising the debt ceiling. Polls often ask simple yes-or-no questions, and the respondents may not have understood the consequences here. If the debt ceiling isn\u2019t raised, America will end up defaulting.<\/p>\n

What would default mean?<\/strong> Picture something like the Wall Street downturn of 2008-2009 happening again \u2026 but in a broader context.<\/p>\n

As Treasury Secretary Timothy Geithner explained succinctly in a letter to Senate Majority Leader Harry Reid (D-NV), a default would mean that \u201cthe Treasury would be prevented by law from borrowing in order to pay obligations the Nation is legally required to pay, an event that has no precedent in American history.\u201d A default would limit, halt or impact Social Security and unemployment benefits, veterans\u2019 benefits, federal worker salaries and payments to members of the armed forces.<\/p>\n

These aren\u2019t the only calamities that would happen. America sells Treasuries to finance its federal government operations, and other nations and investors have bought them with absolute confidence \u2013 we haven\u2019t defaulted since 1933. A default would elevate borrowing costs across the board. It would act like a tax. You would see higher interest rates, with implicit damage to equity prices and home values. The ripple from this could hurt retirement savings, consumer spending and investment.<\/p>\n

Moreover, a default would shatter the conviction other nations have in our political framework. It might be decades before we could count on cheap debt again.<\/p>\n

GOP\u2019s memo to Obama: no higher debt limit unless we cut trillions.<\/strong> The President is adamant about raising the debt ceiling. On May 9, Speaker of the House John Boehner (R-OH) said it could only happen if \u201csignificant\u201d cuts to the federal budget could be made: \u201cWe\u2019re not talking about billions here. We should be talking about cuts in trillions if we\u2019re serious about addressing America\u2019s fiscal problems.\u201d<\/p>\n

<\/strong><\/p>\n

The GOP leadership does not want to see emergency tax increases. Addressing the Economic Club of New York, Boehner said that \u201craising taxes is off the table\u201d because \u201cit will have a devastating impact on our economy.\u201d On May 7, Senate Minority Leader John Kyl (R-AZ) requested that revisions to the tax code to address the deficit be kept \u201ctotally off the table\u201d as such moves would only amount to backhanded tax hikes.<\/p>\n

\u201cWe do not have a revenue problem; we have a spending problem,\u201d Boehner noted. \u201cLet\u2019s address the spending problem.\u201d<\/p>\n

<\/strong><\/p>\n

How would privatizing Medicare help?<\/strong> House Budget Committee Chairman Paul D. Ryan (R-WI) claims that his controversial plan to privatize Medicare by 2022 would save the federal government $5.8 trillion over the next ten years. Ryan\u2019s proposed voucher system would assign $8,000 annually to a typical 65-year-old for purposes of buying a private health plan. (The voucher amount would vary per person, with richer and\/or healthier seniors getting less.)<\/p>\n

The non-partisan Congressional Budget Office disagrees and says out-of-pocket medical costs would double for seniors through Ryan\u2019s plan. The CBO estimates that with this voucher system, the typical 65-year-old would pay about $12,510 out-of-pocket each year for medical care above the $8,000 of \u201cpremium support\u201d provided. In contrast, it says that under the current Medicare structure, the same 65-year-old would pay $6,150 out-of-pocket in 2022 (providing Medicare payments to doctors are not greatly reduced).<\/p>\n

<\/strong><\/p>\n

How long before this impasse gives way to agreement? <\/strong>It could take days, it could take weeks. \u201cI am guarded in my optimism,\u201d House Majority Leader Eric Cantor (R-VA) remarked on Bloomberg Television this week. Secretary Geithner claims that the federal government could use \u201cextraordinary measures\u201d to keep borrowing money into the beginning of August. Noting that there was \u201cno hard date\u201d to hike the debt limit, Boehner said that \u201callowing America to default would be irresponsible. But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process.\u201d<\/p>\n

Stay tuned!<\/p>\n","protected":false},"excerpt":{"rendered":"

Congress must think (and act) fast. In the middle of May, the national debt limit of $14.3 trillion will be reached. This means the federal government must increase the debt ceiling sufficiently to cover U.S. obligations through the end of […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[18],"tags":[],"class_list":["post-1202","post","type-post","status-publish","format-standard","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/posts\/1202","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/comments?post=1202"}],"version-history":[{"count":0,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/posts\/1202\/revisions"}],"wp:attachment":[{"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/media?parent=1202"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/categories?post=1202"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/billlosey.com\/knowledge-center\/wp-json\/wp\/v2\/tags?post=1202"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}