Hitting the Federal Debt Ceiling
(The New American) -- by Michael Tennant --
That bump you just felt was the U.S. Treasury running up against the federal debt ceiling of $14.3 trillion. It happened on May 16 and was, as all the proponents of raising the ceiling warned, supposed to precipitate the greatest economic catastrophe in history.
You say you didn’t feel a thing? Well, that’s only because our benevolent Treasury Secretary, Timothy Geithner (left), managed to implement “extraordinary measures” to stave off the calamity until August 2, at which time there will, he insists, be no saving not just America but the entire world. Those “extraordinary measures,” by the way, amount to not “issuing and reinvesting government securities in certain government pension plans,” explains Robert Wenzel of EconomicPolicyJournal.com.
Just what is the debt ceiling? Theoretically, it is the maximum amount of the debt the Treasury is permitted to issue. Practically, it is a smokescreen designed to make voters think Congress is serious about tackling the problem of deficit spending. As Geithner never tires of reminding us, “Congress has always acted when called upon to raise the debt limit. Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend, or revise the definition of the debt limit.” In other words, given the choice between reining in spending and going further into debt, Congress has invariably chosen the latter.
In a recent letter to Sen. Michael Bennet (D-Colo.), Geithner reiterated the disasters that he believes could befall us if the debt ceiling is not increased: forced spending cuts; higher interest rates; “a sharp decline in household wealth”; an increased federal debt burden; a global economic crisis; and “a double dip recession.” The hyperbole is so thick you can cut it with a Ginsu knife — and still slice a tomato.
The fact that Geithner has found ways to put off the inevitable collision of deficit spending and the debt limit proves that raising the limit is not nearly as urgent as Geithner and other Democrats would have us believe. As Michael Tanner of the Cato Institute pointed out in January:
While Congress has never before refused to raise the debt ceiling, it has in fact frequently taken its time about doing so. In 1985, for example, Congress waited nearly three months after the debt limit was reached before it authorized a permanent increase. In 1995, four and a half months passed between the time that the government hit its statutory limit and the time Congress acted. And in 2002, Congress delayed raising the debt ceiling for three months…. In none of those cases did the world end.Republicans, therefore, can afford to wait this battle out, hoping the Obama administration blinks first and concedes to “cuts of trillions, not billions” of dollars — the price House Speaker John Boehner (R-Ohio) demanded in exchange for GOP acquiescence on raising the debt ceiling. Their resolve should also be strengthened by the fact that public opinion is on their side. A May 5–8 Gallup poll found that 47 percent of Americans are opposed to raising the debt ceiling, while only 19 percent are in favor of it. (The other 34 percent weren’t paying attention enough to have an opinion on the subject.)...MORE...LINK