Less than one week until financial Armageddon! At least that is what both sides of the debate would have you believe. And to be honest, a failure to raise the debt ceiling would be tragic for the country and the world; not directly because of an inability to pay U.S. debts, but rather as a result of the economic instability and the corresponding job losses which will result from the illustration of the impotence of the modern American political system.
United States debt repayment is guaranteed in the U.S. Constitution under the Fourteenth Amendment, Section 4: “The validity of the public debt of the United States, authorized by law…shall not be questioned.” Therefore any budget passed by Congress and signed into law by the President must be honored; not to do so would be a violation of the respective oaths which Senators, Representatives, and the President vowed to uphold and defend the U.S. Constitution.
That being said, it is important to remember that the 2012 federal budget, which has not yet passed in Congress, will need to do so by the end of the 2011 fiscal year on September 30, 2011, a date which is rapidly approaching. Even so, as a hard debt ceiling is unconstitutional, Congress could go ahead and pass the budget and ignore the debt ceiling if desired.
However, while the raising of the debt ceiling is technically not necessary, not to do so could dramatically and negatively impact economic growth and job growth for years to come.
Each time Congress ignores its own legislation it undermines the authority of the Congress and weakens the credibility of the U.S. government in the eyes of U.S. Treasury investors. So much of economic growth is about positive perception and confidence. Whether or not the credit rating of the United States is downgraded, businesses will be reluctant to grow their U.S. labor force without the confidence that the U.S. government at least has the potential to move forward out of its political quagmire.
It is in the nation’s best interest to raise the debt ceiling with some included deficit reduction initiatives in order to build economic confidence. There is no way around the fact that for serious deficit reduction to occur, spending cuts as well as tax increases and the removal of tax loopholes for the rich and corporations will be required.
In addition, there must be an initiative to steadily grow the Gross Domestic Product (GDP), otherwise the other two solutions will have no impact over the long term and could significantly cripple the nation. This last step has been woefully ignored in this debate by politicians on both sides of the aisle. While the President and Congress assume the GDP will grow in the coming years, and they are most likely correct, having an actual plan to grow the GDP would further strengthen confidence in the economy in he eyes of investors, as well as in the eyes of consumers.
Unfortunately, politics enters the arena of debate and gums up the whole negotiation process. Rather than working towards a logical and sustainable plan for the future, both sides instead have their eyes on 2012, and they are each crafting plans to help them in their political dialogue rather than truly help the country with its long term economic goal.
While congressional Democrats have done some political maneuvering, the worse of the two sides in this debate is that of the congressional Republicans. So intent on removing President Obama in 2012, they are working to create as much economic instability as possible, even if it causes another recession or even a depression. They know (and according to history they may be correct for the most part) that if the economy stays in the basement and job growth does not increase over the next 15 months, the majority of moderate and conservative Democrats and Independents, rather than blaming the Republicans whose irresponsibility and lack of action has prolonged this floundering economy, will instead blame the person in the White House despite his constant efforts throughout his term in office to stimulate economic growth.
Yes, the debt ceiling crisis is being used by the GOP as a cover to create economic chaos in their attempts to win back the White House. Rather than being blind to the collateral damage such economic instability may cause, Republicans are eagerly counting on it. And in such dastardly political brinksmanship, working class and middle class Americans will end up paying the price.