If I max out my credit card, why can’t I just raise my debt ceiling?
Public distress about the debt ceiling started at the end of 2012 with the introduction of the phrase “fiscal cliff”. Two daunting words next to each other without a third for ease, and without proper context they mean next to nothing. Though the plan had been set to go into effect since the Budget Control Act of 2011, few Americans knew the implication of those words: a combination of budget cuts and tax hikes designed to begin making a dent in the federal deficit.
In 2011, the U.S. was in danger of defaulting on its national debt. Our only other option was to raise the debt ceiling enough to allow for our federal loans to remain unpaid. As a compromise to those opposed, a stipulation was added that if no action was taken to reduce spending, automatic budget cuts and tax increases were to be put into place at the beginning of 2013. These cuts were reasonable and non-discriminatory, but the obvious concern was the recession and loss of jobs that would follow such government cuts. So the ceiling was raised. The roof stayed firmly in place, though several eyewitnesses report it being on fire.
By January 2013 the proposed automatic budget cuts had been suspended, and Obama went head to head with the House Republicans to raise the debt ceiling again, this time without the threat of automatic spending cuts or higher taxes for the wealthy. Our options to reduce the deficit were (and remain) similar to those of a failing business: either bring in more money, or spend less. The fear is the same on either side of the coin; a country’s economy will suffer no matter whether its government raises taxes, reduces funding, or a little bit of each. In an attempt to bring some rhyme or reason to this dilemma, U.S. taxpayers decided to pay a group of folks to muck around with all sorts of figures and percentages. Somehow this group of folks determined which amount of whose dollars should go to one place or another, and Obama’s American Taxpayer Relief Act was passed.
So what should a failing business do? Essentially the U.S. is a failing business, spending and lending substantially more money than it generates in revenue. The U.S. government, unlike most businesses, has the luxury of borrowing trillions of dollars and the power to indefinitely postpone the responsibility of paying it back. Without the looming possibility of a few proverbial fingers getting broken, where is the motivation to pay our debt? Even the small reward of glimpsing a positive number in the national bank account does not seem likely or even possible in my lifetime (or yours). Needless to say, even if the Chief Executives decided to forfeit their salaries, this corporation of the United States of America will not be turning a profit this quarter.