Nevertheless, our time has come. As we write this early during the week of Oct. 14, the debt ceiling limit deadline is only three days away, and while there have been some hopeful noises made from time to time over the past few days, the White House and congress still seem far apart on a budget deal that would break the impasse. Damage has already been done both on the budget and debt ceiling sides, so even with a speedy resolution of both issues, harm has been done. In its paralysis, the unthinkable now seems at least a 50/50 proposition - Congress might actually not raise the debt ceiling limit. As we write this there is still time for the members of Congress to come to their senses and at least get that once routine piece of business taken care of. The last time this was turned into a political football, in 2011, an 11th hour settlement avoided what would have been a crippling blow to a national economy that was just beginning to sustain a recovery from the collapse of 2008. Such a failure two years ago, the last-minute avoidance of which still tarnished all the parties involved, would also have sent shockwaves through the international economy. That realization may have finally woken up enough "leaders" to forge an agreement on raising the debt ceiling back then, and we hope it does again. It's a sorry state of affairs when you have to use the term "hope" in that context.
Let's stick with the debt ceiling question for a minute, because it's a little more straightforward than the budget and spending logjam Congress has manufactured for itself. The debt ceiling pertains to the U.S. government - that's us - paying its bills on time. When you're the world's reserve currency - a position that allows the U.S. much more flexibility on how it manages its budget and spending habits than any other country and is not a status to be discarded without consequences - and when you are carrying $16 trillion in national debt, defaulting on those obligations is not the same as a family or a business opting not to pay the mortgage or some suppliers this month. Unless you're prepared to play Russian roulette with an already shaky world economy, it's not an option to default. Borrowing costs in the future, currently at low and affordable levels, because the U.S., for the moment at least, is still seen as a safe haven for investors, could rise sharply, making interest payments on that $16 trillion unaffordable, or crowd out spending on other things, like defense, education, healthcare and the myriad of things the government spends tax revenue on. That scenario may be approaching anyway, as we'll discuss in a minute, but failing to raise the debt ceiling now would complicate that problem enormously and could make it unmanageable. The debt ceiling needs to be raised because of spending Congress and the President have already agreed to. That any elected politician could even contemplate not raising it is breathtakingly irresponsible and those politicians should be voted out of office.
The reason for the continued upward pressure on the debt ceiling comes from a federal budget process that is dysfunctional and out-of-control. It's been years since Congress actually passed a formal budget as opposed to a continuing series of resolutions that funded things for the short term and kicked the can down the road, as the expression goes. That's a bad way to budget, because instead of taking a long term view and looking down the road 10 or 20 or more years and making informed decisions on taxing and spending that reflect the nation's priorities, the result is a mash up of the politically popular, programs that may have outlived their usefulness, to go along with the vital, essential spending.
It was extremely unfortunate that hard-line conservatives in the House of Representatives chose to lead with defunding the Affordable Care Act (aka Obamacare) instead of focusing on the big picture of federal spending. Left unchecked, the U.S. is likely to experience a sharp increase of payments due to an ever-increasing number of senior citizens through Medicare, Social Security and other "entitlements." The U.S. economy is not growing at remotely close to the rate it would need to in order to spin off enough revenue to pay for them. This is a long-term, structural problem that some foresightful analysts have been warning about for some time, but Washington has been incapable of solving. As we are seeing with the pension benefits issues that many municipalities and states - Vermont included - are grappling with, as well as budget issues in general - note Gov. Shumlin's instructions to his budget people to hold the line on spending when it comes to next year's state budget - Vermont, along with the rest of the country, is simply running out of money to pay for all the things it would like to have. A day of reckoning is fast approaching. Some combination of smarter taxes, like fewer loopholes and a smaller base rate, and lower or no-growth spending levels, will be mandatory. The right time to begin making this transition was years ago, but with Washington mired in gridlock, the "grand compromise" is stuck in neutral.
Had House Republicans made that their main message, and not Obamacare (which ironically went on being funded even as "non-essential" pieces of the government were not), that would have been both politically smart and closer to the real debate the nation needs to have. Additionally, the focus would have been on how poorly most of the online health exchanges functioned, or failed to function, when they opened for business on October 1. But that too was buried underneath meaningless rhetoric about defunding Obamacare, which was never going to happen. Hopefully by the time most readers are seeing this, agreements will have been struck on both the debt ceiling and the budget impasse. If not, we're in for a journey into unnavigated, and we fear, perilous waters. Congress and the President should both be ashamed if that is where things stand come Friday, Oct. 18.
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