Cutting just $38 billion from this year's federal budget, one with a staggering deficit of $1.6 trillion, set off a fierce partisan battle that nearly shutdown the U.S. government. Now comes the debt ceiling clash.
Republicans won't allow the current $14.25 trillion federal debt ceiling to be raised unless President Obama and the Democrats commit to far bigger spending cuts for the next fiscal year beginning October 1st. These include cutting or eliminating spending for abortions, health care, the environment, Planned Parenthood and much more, in exchange for their agreement to raise the debt ceiling.*
Neither Republicans or Democrats however are discussing slashing military expenses such as ending the three wars, cutting back the contracting for weapons of mass destruction, which employ millions of Americans or closing military bases all over the world, including those in Germany and Japan where the war has been over for 65 years. In fact, military spending continues to rise. That they can agree upon.
Treasury Secretary Timothy F. Geithner warned Congressional leaders last week the government would hit the debt ceiling by May 16th. He described “extraordinary measures” to extend this deadline until July 8th. Once the U.S. hits that ceiling, it could not pay its bills. It could not borrow to finance itself and refinance existing debt or raise new debt, thus thrusting itself into default.
What would it mean to you and me? Interest rates would soar, meaning credit card charges would rise sharply for any unpaid balances, mortgage rates would jump sharply, depressing housing prices even more, the U.S. dollar's value would drop which would hike the price of gasoline and other imported goods, imported goods being most of what we use, and our savings would lose their value.
Given these dire prospects, it's unlikely another ugly political threatdown will occur. But politicians will parade in front of TV cameras and insult one another, much as they just did. Ultimately, they will raise the debt ceiling and by enough to likely get them through the 2012 elections so they don't have to deal with our nation's severe financial problems until well into the future when those problems are much worse.
Therefore it is critical you and I stay involved. Our nation really is in desperate financial circumstances and hundreds of billions of dollars must be cut, wars must be ended and taxes are going to have to be raised. The sooner we address our problems and do it with civility, the sooner we can solve them.
Dick
*According to our government's own records, our deficit is actually already approaching $14.3 as it continues to soar. So this debate about exceeding the debt ceiling is nonsense. We've already done it. Everything for now goes on as normal as long as the world still accepts the U.S. dollar at face value. That could change.
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