Debt Ceiling and Couples Therapy
by Doyle Ranstrom on Oct 3, 2021
A couple decides to buy a house. Since one partner wants a certain type of house and the other a different type of house, they compromise and buy a more expensive house that has what both want. When I say buy, I mean they obtained the largest mortgage they could. Later they want a new car. Since one wants a huge SUV and the other a small hybrid, the compromise and buy both. When I say I buy, I mean they financed 100% of the purchases. Later, they decide to remodel the house. One wants to remodel one part of the house and the other a different part, so they compromise and do both. There goes the equity in the house. Finally, after all this, they decided they need a vacation. One wants to go to Hawaii, the other Europe so they compromise and do both putting the trips on their credit cards.
Finally, though they have bicycles, they decide they want new ones, again charging them to their credit cards. Of course, it is not possible to have too many bicycles and this is an excellent purchase on their part.
A bit later, now with children, they look at all their debt and decide to not pay it. If you understand this, you understand the Federal debt ceiling. The debt ceiling is not about future spending, it is simply about paying current debts. If the couple does not pay their debt, there are consequences. They may go bankrupt, could lose everything and since their cars could be taken, may end up living in a tent, with their children. If the Federal Government does not raise its debt ceiling to pay current liabilities, millions could be affected financially and some could lose everything with the possibility of eventually living in tents.
The debt ceiling is a result of a bill enacted by Congress in 1917 which means Congress has to vote to increase the debt ceiling to pay current obligations, not future ones, current ones. For years it was automatic but a number of years ago it became a political issue that one party could use to make the other party's life miserable.
And for the record, and I have said it before, and I understand this perspective makes some unhappy, but in my estimation, we have two political parties, tax and spend and borrow and spend. If you do not agree, please note the following.
- At the beginning of 2000, the Federal Deficit was $5.7 Trillion.
- At the beginning of 2021, the Federal Deficit was $27.7 Trillion.
- Trillion is a lot of zeros. 12 zeros following a one. $1,000,000,000,000,
- During this 20 year time period, the party control was as follows:
- Presidency, borrow and spend 12 years, tax and spend 8 years.
- House of Representatives, borrow and spend 14 years, tax and spend 6 years.
- Senate, borrow and spend 10 years, tax and spend 8 years. 2 years they were equal.
I am sure members of one party will look at this and blame the other party and make excuses for their own. This is part of the problem. Just like our couple at the beginning are dysfunctional, so are our political parties.
For me, as a moderate independent, one of the most frustrating aspects is after increasing the Federal Deficit by $22 Trillion over 20 years, what do we have to show for it?
Another frustration for me, is there are politicians and their supporters who seem to actually believe that not raising the best ceiling is being financially prudent. So let's discuss this. According to a report dated 9/21/2021 prepared by Moody's Analytics:
- GDP could decline by 4%.
- Nearly 6 million jobs could be lost.
- Interest rates could increase.
- Unemployment could increase to close to 9%.
- The stock market could decline by 33%.
Other consequences include social security benefit payments could stop, pay to military members, as well as other federal employees could also stop. Many federal programs could stop. The US's credit rating could be downgraded.
Our hypothetical couple at the top need financial counseling and couple's therapy. Our two political parties also need financial counseling and therapy. But I truly believe what we need is a new political party.
In the meantime, it would seem to me if the US should go bankrupt, all seats of Congress, House and Senate, should be up at the next election with the caveat none of the current members would be allowed to run. If a specific Congress causes the country to go bankrupt or even get too close to it, they are not competent to serve in Congress. None of them.