The House of Representatives voted unanimously to kill the bill which would raise the debt ceiling. The United States has exceeded its $14 trillion dollar debt ceiling meaning the US Treasury can not borrow money to pay the Government’s bills and meet Federal payrolls.
If the debt ceiling is not raised by August 2, 2011, the US will be forced to default on its loans and perhaps stop writing checks to the military, federal employees, and social security recipients. Some economists predict it will set off a depression.
Misconception: Raising debt ceiling does not increase deficit
There is a public misconception about the debt ceiling. The debt ceiling is the amount that Congress authorizes the Treasury Department to issue in Treasury bills in order to pay for the items that Congresses has previously appropriated. Raising the debt ceiling is not new spending.
This is the same thing as a person who maxes out his credit cards in December and gets the bills in January. The check he writes to the credit card company is not new spending; it is just paying for what he already spent. If he is short of cash, he must borrow to pay the bills. If he defaults they shut off his credit. If he still doesn’t pay, he might be forced to file bankruptcy. The same is true for the Government.
The government does not have enough money to pay the bills that Congress ran up over the years. Therefore it must borrow or default. Congress has refused to borrow to pay the bills. If it does not pay by August 2, the government will default. Previous Congresses borrowed to pay its bills. This Congress is seriously considering stiffing our creditors.
Republicans demand debt ceiling increase must include budget and Medicare cuts
Republicans insist that any bill to raise the debt ceiling must include “trillions” in budget cuts and debt reduction. They also want something done about the national debt, most of which was run up by Republicans.
The Republican Leader in the Senate, Mitch McConnell (R-KY) said he would not vote to increase the ceiling unless “…Medicare is part of it.” What he is referring to is the Republican Budget bill which passed the House but died in the Senate.
Democrats and President Obama oppose the elimination of Medicare. So do 80% of the American people. Last week, voters in the solidly Republican 26th district in New York elected a Democrat to Congress in a special election. The Republican candidate’s support of the Ryan bill, which ends Medicare, was widely seen as the reason.
Republicans want the money to reduce debt to come from cuts and refuse to even consider any tax increases or changes in tax code that would eliminate deductions for oil companies and corporations, which pay no tax. Democrats propose a mix of revenue increases and budget cuts. There is an impasse.
What happens next?
The debt ceiling was exceeded two weeks ago. The government has enough money to operate until August 2, but that is dooms day if the ceiling is not raised according to the Treasury Department. Talks to find a compromise between the Republicans, Tea Party Republicans, Democrats, and the White House have been on again and of again.
Tea Party activists elected to Congress last fall refuse to give an inch. The Republican Leaders in both Houses seem to be more concerned with keeping their leadership positions than compromising to solve the problem.
The political situation is made worse because of the upcoming presidential election. Republicans must move to the right in order to appeal to evangelical Christians and Tea Party members who dominate the Republican nominating process. This makes it difficult for Congressional Republicans to compromise even for good of the country.
Democrats are in the same position. They must remain steadfast in their position on Medicare since the voters are soundly against eliminating it.
Time will tell if Congress will do the right thing, or the political thing. The world is watching.
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