President Barack Obama is reaping what he sowed in the debt-ceiling fight, but that does not change the economy’s peril if Congress refuses to raise the debt ceiling next month.
In 2006, Obama voted with every other Senate Democrat against raising the debt ceiling. Obama went one better than a “nay” vote. He gave a memorable speech.
“The fact we are here today to debate raising America’s debt limit is a sign of leadership failure,” Obama said. “It is a sign that the U.S. government can’t pay its own bills.”
It was political posturing. Democrats were a Senate minority, and they were enjoying the luxury of irrelevance. They knew the Republican majority had no choice but to increase the debt ceiling.
If the only consequence of the Republican-controlled House’s threat to vote against the debt ceiling was a comeuppance of the president, it might be deserved. Unfortunately, all Americans will be victims of a debt-ceiling debacle.
In mid-February, the Treasury will run out of money. Arguing who holds the most blame for decades of increasing federal debt is pointless. The fact is the Treasury makes 80 million separate payments a month, every single one previously authorized by Congress.
Prioritizing those payments when there is not enough money to cover all of them is a huge logistical challenge.
The prioritization cannot go smoothly. Defaulting on debt payments that come due could easily crash the economy. Because the U.S. dollar is the world’s benchmark currency, the damage would be global.
On the other hand, refusing to make the millions of payments to Social Security recipients, veterans, active military, civilian employees at Redstone Arsenal and others dependent on federal payments would not only damage the economy, it would result in claims that the administration is playing games to put political pressure on the House.
The sad fact is that Republican House Speaker John Boehner understands the problem, he just lacks the ability to control the irrational members of his caucus. In January 2011, shortly after the tea-party contingent elected in 2010 took office, Boehner explained that a refusal to raise the debt ceiling was not an option.
“That would be a financial disaster, not only for us, but for the worldwide economy,” Boehner said on Fox News Sunday. “I don’t think it’s a question that’s even on the table.”
While most economists believe spending cuts that take effect before the economy strengthens are a mistake, there is no question Congress needs a plan to reduce federal debt. A major part of that plan needs to include reducing expenditures.
It won’t be easy. All members of Congress — including those in north Alabama — give lip service to deficit reduction, but fight to maximize federal expenditures in their districts.
Refusing to pay the bills Congress already has incurred, however, is not the answer. The mere threat of doing so last year resulted in a downgrade of U.S. debt.
Senate Democrats, including Obama, engaged in silly but harmless political posturing in 2006. Because House Republicans have the responsibility of governance, their posturing is not harmless.