The definition of default is: (noun) a failure to fulfill an obligation, especially to repay a loan or appear in a court of law. By the strictest interpretation of this definition, America is constantly in default status.
The failure of Congress to raise the debt ceiling will not cause America to default on anything. There is sufficient tax revenue each month to enable America to pay the interest on its national debt and satisfy the current redemption rate of treasury bonds.
Raising the debt ceiling is like a home mortgage borrower going to the lending institution and saying that unless he is loaned more money, he can’t pay his mortgage interest. What bank or lending institution would loan more money based on that circumstance? Yet that is what the Administration wants us to do—we must borrow more money in order to pay back the money that we owe! In point of fact —we have paid off absolutely nothing on the principal debt that we owe and haven’t for years. How could one possibly decrease the principal debt if one continues borrowing and increasing the amount of the debt?
Federal Reserve Chairman Ben Bernanke has said that a U.S. default could be a “recovery-ending event” that would likely spark another financial crisis. This is interesting because it reflects the prevailing mindset within government. This begs the question —if constantly increasing debt is a sound financial plan, why isn’t that principle taught in economic courses? Trying to borrow oneself out of debt is kind of like attempting to lift a bucket while standing in it.
Whenever government wants to increase spending, it develops a “doomsday” scenario of events that will supposedly occur if it does not get its way. Rarely do these scare tactics materialize —but they serve their purpose, which is to frighten the uninformed among us. Then, to bolster the impression of impending doom —government will invent a scenario which supports the premise.
We see this ploy at work every time we turn on a television or open a newspaper. The WWII memorial was closed, the Vietnam War memorial was closed, the parking lot at the Mount Rushmore monument was closed, tourists were denied picture taking at Yellowstone Park, and on and on. In reality, how can the government keep folks from looking at a wall, a memorial, or a sculpture on the side of a mountain? And where does the money come from to pay people to put up traffic cones, barriers, and the like, that people are going to ignore anyway? What part of OUT of money is confusing this issue? What is the logic (if any) that is being applied by the Administration? Is someone going to steal Mount Rushmore? Drag off the Vietnam wall? Of course not —but the act of “closing” these landmarks finds its way into the media, and that is the only goal. As a side note — there seemed to be no problem finding funding to provide Capitol Police presence for an illegal immigration rally on the National Mall.
America’s politicians have managed to paint our country into a corner where we actually have no good choices. The one inescapable fact is that the longer that we wait to address our growing mountain of debt, the slimmer our chances become to solve the problem. At some point the growing debt will become completely untenable due to continued devaluation of the dollar. Devaluation will sooner or later lead to inflation. Inflation will lead to a rise in the interest rates, and then America will be unable to pay the ongoing interest payment —that will meet the definition of “default.”
Borrowing more money only postpones the inevitable. This fact is inescapable —individuals cannot sustain their spending by continually borrowing and neither can governments. The idea that America will miraculously come out of its financial doldrums and the economy will begin to fire on all cylinders is nothing more than wishful “pie in the sky” Pollyanna optimism. America is no longer a manufacturing nation, and without manufacturing, there can be fewer semi-skilled jobs available. And without jobs, employment will continue to stagnate, more and more federal dollars will be funneled into social programs, and America’s financial future will grow bleaker with each passing day.
Perhaps if our political leaders would act less like petulant children who have spent their allowance and want more —and at least pretend to be responsible adults —then perhaps, we could avoid the looming catastrophe. If ever there was a need for a “red line in the sand,” it is with the impending debt ceiling. Unless we are resigned to the financial collapse of America, we must stop the borrowing —why not right now?
I listened to President Obama’s fire-side chat news conference and heard him say that “increasing the debt ceiling would not add to America’s debt.” Borrowing another one trillion dollars will not add to the debt! Mr. Obama is not from Kenya, but definitely from some loony galaxy, far, far away if he believes that!
Have a good week. Bill Shuey is a freelance writer who lives in Murphy, NC. He can be contacted at: firstname.lastname@example.org.