According to U.S. Treasury Secretary Steven Mnuchin, the debt ceiling must be raised by the end of September or the department will not have enough money to pay its bills.
Mnuchin, Senate Majority Leader Mitch McConnell, House Speaker Paul Ryan and a host of other politicians are eager for a clean bill with no spending reforms attached. However, questions remain regarding whether or not this is really in America’s best interest.
Will failure to raise the debt ceiling really result in unprecedented financial chaos in the United States and even around the world? Following is an overview of where the fight to raise the ceiling stands, and what could happen should Congress fail to reach an agreement on this important issue.
Where the Fight Stands
At first glance, it would appear that there really isn’t a fight over raising the debt ceiling. Treasury Secretary Steven Mnuchin, President Trump and the leaders of both houses of Congress all want a clean bill. Democrats seem to agree that the debt ceiling absolutely must be raised. However, many disagreements lurk under the surface, and these could cause a clean spending bill to fail.
Fiscally conservative senators and congressmen are stating clearly that a debt ceiling hike must be accompanied by either spending cuts or fiscal reforms; however, GOP leaders have so far refused to consider their comments and opinions.
House Democrats naturally have their own priorities, and it appears they are interested in attaching conditions to any vote on raising the debt limit. While the Democrats are in the minority both in Congress and Senate, the GOP leadership may need Democrat votes if conservative Republicans refuse to back a clean bill.
Moderate Republicans are considering the idea of rolling a debt ceiling increase into a spending bill that must be passed before the end of September in order to avert a government shutdown. However, this idea may not work out as President Trump has just declared yet again that he would not support a spending bill that does not include funding for a wall between the Untied States and Mexico.
Does the Debt Ceiling Need to be Raised?
Mainstream news media outlets are chock full of dire warnings about what would happen if the debt ceiling isn’t raised. They note that local and state governments, contractors, federal employees and bondholders would either not be paid in full or not paid at all. This would cause serious problems for the economy, as millions of people suddenly fall short of cash at the same time. The United States could even have its credit rating downgraded, and economies worldwide would lose faith in American financial markets.
On the other hand, those who have analyzed the problem in-depth note that the United States does not really need to keep borrowing hundreds of billions of dollars every single year in order to make ends meet. There are many ways the government could cut expenses in order to avoid spending more than it collects in taxes and through selling bonds.
Some of the many ideas include significantly reducing spending on foreign aid, cutting waste in government welfare programs, eliminating funding for unnecessary state and even federal agencies and curtailing entitlements to members of the Armed Forces.
Naturally, a failure to raise the debt ceiling would cause financial problems; however, they don’t have to spell doom for the country if the United States government changes the way it manages money. In the long run, the financial system would be stronger as investors, financial institutions and regular individuals alike would no longer have to worry about ongoing threats of the government running out of money to spend.
Unfortunately, the fact that the Republicans and Democrats are at war within their own parties and each other means that there is little to no chance that a common sense, long-term solution on spending would get anywhere. Even if the government were to somehow pass a spending hike that would allow the Treasury Department to operate as if everything were normal, the fact is that no country can borrow money indefinitely without facing the consequences at some point in time.
The only question that remains is how soon the United States economy will face severe turbulence due to lack of a reasonable fiscal policy.
~ Conservative Zone
