First, let me clarify that I am no financial expert of any kind. I'm not a tax attorney or anything at all as far as economics goes. I just want to be open and honest and realistic about the debt ceiling debate and things that can happen. There are numerous reporters and writers out there who are spreading things that just aren't true. I am not going to write about public opinion, but mine, and a lot of factual information.
So, now that this is prefaced, let's look at this thing. First, I am sure that most people understand that we have borrowed as much money as we are legally allowed to as a country. It's just the same as hitting your limit on your credit card. And it seems both take an act of Congress to get that limit raised. It's a complex thing that has been raised countless times and it isn't normally a big thing. However, this time is different. Here are some facts: First, WE WILL NOT AUTOMATICALLY DEFAULT ON OUR DEBT AUGUST 3RD. We will not default on our debt unless people stop paying their taxes. You must understand that businesses pay their taxes quarterly and when you have taxes taken out of your check, it goes to the government coffers in a timely manner. So, there is over $200,000,000 coming into the federal "checking account" every month at this time. The 14th Amendment states that the service on our debt must be the first check written. Period. No debates. No questions. IT MUST BE PAID. That's why we can't default unless the President decides to go against the Constitution. Next, you must understand that Congress actually decides where all of our taxpayer money is spent, not the President. He has to agree to it, but they make the decisions. However, in this case, the decisions of what gets paid goes to the Treasury Department, which is part of the Executive Branch. So, the President, Treasury Secretary, and any and all cabinet members and advisers have to pick and choose what bills will be paid and what can be put off for some time. So, the question is will people get their Social Security checks. That depends on what the President decides. It is completely his decision. Will the Border Patrol get furloughed? Again, it is his decision. These are real possibilities. He has been chosen to lead this country and that gives him the right to decide who gets paid and who doesn't. It's that simple. The money will be there to cover many functions of this country: the interest payments on the debt that MUST be made, defense spending, Social Security, and other things. What the President is asking to do is to borrow more money so that he doesn't have to decide what to pay and what not to pay. He wants to be able to pay everything and not upset anyone. The Republicans have chosen to take a stand at this juncture in our history. They see an opportunity to basically hold the President hostage. They have an important card that he wants and they aren't going to hand it to him without some guarantees of less spending and they also want to start the process of adding a "Balanced Budget" Amendment to the Constitution. They would like for this to be the last time the debt ceiling is raised. They see this as a chance to start decreasing our deficit instead of just allowing the limit to be raised again and again. This makes for conflict since the President feels that this would hurt the economy by limiting the amount of money the government can use to help people and companies get through this difficult time. This makes for a whole lot of politicians in Washington that are on very unstable footing with their constituents. That means you will hear each side blaming the other and trying to tell you the horror stories of what might happen if their side doesn't "win" this debate.
It seems both sides want to lessen the amount of money we have to borrow. The difference seems to be in how they want to reach this goal. Democrats and Republicans are both open to cutting spending. This includes the President. The difference is what each wants to cut and how much. The Democrats want to lessen our need for borrowing by increasing revenue. Republicans are split on this in some ways, but most agree that raising taxes is the wrong way to address the problem. It all boils down to philosophical, basic differences between the parties and the American people. Both sides are dug in to their positions. In normal times, this would be a long, drawn out battle. In this situation, there is a definitive time that could change the rules. The debt ceiling can still be raised at a later day. Depending on when and if that happens, there are a myriad of possibilities for outcomes to this whole thing.
I have tried to stay completely unbiased in this analysis. My next planned blog will be my opinion on answers, so don't judge me yet for not having any ideas on what to do. I just want to have separate entries for each one so there is no confusion between what is fact and what are my thoughts and ideas. Please feel free to ask any questions or post any comments.
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