Debt Limit and the Republicans

It seems almost unbelievable, but there is a chance that the Congress will refuse to raise the debt limit of the United States and the nation will go into default. The reason for this could be that the Republicans are simply unwilling to restore the tax rates previously placed on extremely wealthy people. In addition, there are many of the Tea Party Republicans who simply want the default to occur. Even though we have been warned that default could destroy the economy, these people believe that it would also destroy the Administration of President Obama. They are filled with hate for our biracial president, and are willing to bring on an economic catastrophe in order to unseat him.

The Republicans are playing a dangerous game of Chicken. The debt limit is basically the maximum amount of money that the U.S. can borrow at any one time. Because of the deficit spending during the Administration of George W. Bush, the nation has already spent more than the amount of the debt limit. Thus, it is not a question of more spending. It is a question of paying for things that have already been bought. Among the things causing this problem are the costs of two wars, the Medicare Part D Drug Program, and the huge tax cuts for the wealthy granted by Bush and the Republicans.

Few People realize that we have already gone past the date when the debt limit should have been raised, and that the U.S. Treasury has been able to function only by juggling the books and using certain pension and other funds in order to keep the government running. It will no longer be able to do that after August 2. If the Congress does not raise the debt limit by that date we are in for economic catastrophe. But we should not wait until then. Each day that the Congress delays in approving a rise in the debt limit, the crisis becomes more severe and the damage to America’s credit grows.

Back in January, Treasury Secretary Geithner warned lawmakers that the national debt could hit the legal limit on borrowing as soon as March 31, 2011, and he urged quick action to avoid a government default that would spark "catastrophic economic consequences that would last for decades." He said that unless Congress acts to raise the limit, the United States will default on its debt, an unprecedented event that could destroy "millions of American jobs," cause interest rates to spike, damage the dollar, and halt payments to millions of Social Security recipients, veterans, and active U.S. troops.

It is sad to think that partisan politics in America has arrived at the point where members of one major party are so filled with hatred for the government that they are willing to destroy the economy of the nation rather than allow the government to run smoothly. The Congress has never failed to raise the debt limit when needed. During the last Bush Administration, Congress raised the debt limit four times. It is simply unthinkable that it would fail to do so this time.

Nobel Prize laureate Paul Krugman advises that “If we hit the debt ceiling, the government will be forced to stop paying roughly a third of its bills, because that’s the share of spending currently financed by borrowing. So will it stop sending out Social Security checks? Will it stop paying doctors and hospitals that treat Medicare patients? Will it stop paying the contractors supplying fuel and munitions to our military? Or will it stop paying interest on the debt?... At least one, and probably several, of these components will face payment stoppages if federal borrowing is cut off.”

According to Matthew E. Zames, a managing director at JPMorgan Chase and the chairman of the Treasury Borrowing Advisory Committee, any delay in making an interest or principal payment by Treasury even for a very short period of time could trigger another catastrophic financial crisis. Mr. Zames notes that a default by the U.S. Treasury, or even an extended delay in raising the debt ceiling, could lead to a downgrade of the U.S. sovereign credit rating. The resulting financial crisis could trigger a run on money market funds and economic collapse.

The Republicans have a right to demand that there be spending cuts to counterbalance any rise in the debt limit. But their demands are outragous and amount to blackmail and extortion. Now they are demanding that the President reduce the deficit by repealing much of our social legislation. Many of them want the Democrats to agree to repeal the Patient Protection and Affordable Care Act of 2010. They want to eliminate certain departments of government. They want the government to adopt the Ryan budget which eliminates Medicare. They are obsessed with reducing the deficit, but for some reason, they are violently opposed to restoring the tax rates for wealthy taxpayers that existed at the time of the Clinton Administration.

It seems clear that the Republicans feel beholden to the fabulously wealthy fat cats who finance their campaigns. Meanwhile, the ordinary Republican voters seem oblivious to the fact that many of the Republicans in Congress are willing to sacrifice the economy of this country by letting it go into default. And they are willing to sacrifice the senior citizens of this country by allowing the stoppage of payments of social security and Medicare.