Debt Showdown Reveals an Out-of-Touch Congress
God only knows what alternative universe the United States Congress occupies. On May 31, the U.S. House of Representatives failed to pass a bill to raise the debt limit of the United States. The Republican leaders wanted it to fail because it was a "clean" bill. It would have raised the debt limit with no strings attached, with no accompanying budget cuts. The Republicans want trillions of dollars in budget cuts in exchange for increasing the debt limit. This is strange logic that demonstrates that our leaders are more interested in the next election than they are in doing what is right for this country. They live in a political universe that is far removed from the day-to-day struggles of ordinary Americans.
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I hope and pray that every member of the Congress understands that if the debt limit is not raised, an already fragile economy will suffer a major blow, and may even take us back to the crisis days of September 2008. If the debt ceiling is not raised several very bad things will happen. The United States does not have the cash flow to meet all of its obligations, and it will be more difficult for it to borrow what it needs to meet all of its obligations.
Imagine your household budget. You may have enough cash from your paycheck to pay mortgage or rent, pay your utility bills, and pay the minimum on your credit cards, but there are some months when you have to charge the gas or a week or two of groceries. If Congress does not raise the debt ceiling, the United States can pay only those bills that it has the cash to pay. So, it would meet its payroll, pay bond holders, and send out social security checks. When the cash runs out, everyone else goes unpaid. If this happens, bonds will no longer be seen as a secure investment. Conservative investors will stop buying them. If the United States defaults on its debts, the nation will have to pay a risk premium on future loans.
Imagine what happens when you are late on your credit card payments. Your interest rates up, your credit score goes down. The cost for you to borrow money goes up. Such will be the case with the United States government. The cost of borrowing could increase $75 billion per year. The drop in lending would not only affect the government, but would have a negative effect on the ability of ordinary people to get credit. We could find ourselves back in the same place we were in September of 2008. The HBO Movie, Too Big to Fail, gives a dramatic and understandable account of the financial debacle of September 2008.
Congress knows that it must raise the debt limit. And the Republicans want to hold this vote hostage to spending cuts with no discussion of raising taxes. This refusal to raise taxes, especially on the rich, is like an ordinary person looking at his or her debt and saying: I do not need to find more money. Many of us work an extra job or look for a second stream of income to help make ends meet. Imagine that you could not pay your bills, but there was a rich uncle living upstairs who could very easily contribute more, but you refused to ask him. Instead, you decided to cut money for your children's education, for grandmother's health care, and stopped making the necessary repairs to the house. Such would be financial madness.
Dr. Valerie Elverton Dixon is an independent scholar who publishes lectures and essays at JustPeaceTheory.com. She received her Ph.D. in religion and society from Temple University and taught Christian ethics at United Theological Seminary and Andover Newton Theological School.