When President Obama and Speaker John Boehner (R-Ohio) speak to the nation tonight, I urge you to keep a few facts in mind. Many of these points I’ve made before, but you probably weren’t paying attention then. So: Leave aside the politics, which has been plentiful. Leave aside the theater, which has been epic. Focus on what is at stake as the nation hurtles toward default like Thelma and Louise’s car did off that cliff.
The debt ceiling. Increasing the legal limit the federal government can borrow allows it to pay for things it has already bought.
Prioritization. Some folks seem to think all the United States has to do is meet its obligations on interest payments on the debt to avoid default. These same folks believe all the other payments due in August could simply be prioritized. Wrong. A Standard and Poor’s official told Senate Democrats earlier this month that failure of this nation to pay any of its bills on time could lead to an unprecedented loss of its AAA bond rating. Even the minimal drop — from triple-A to double-A — will lead to pain for the American people.
A look at the chart below from a chilling report from the Bipartisan Policy Center also shows why prioritization won’t work.
All told, the Treasury will have $172 billion to pay for $306 billion in bills. On Aug. 3, all hell could break loose. On that day, Treasury is expected to take in $12 billion. But it will have $32 billion in expenses. Social Security checks amount to $23 billion of that total. Only half of the retirees due their checks would get them — assuming the president decides not to put all of the money elsewhere.
The ratings agencies. Moody’s and Standard and Poor’s have been clear on what would stop them from slapping the United States with an unprecedented downgrade. They want to see a big deal, along the lines of $4 trillion. One that puts in place long-term plans that at least start to put the nation of better fiscal footing with regard to debt in relation to gross domestic product. The plans released by Boehner and Senate Majority Leader Harry Reid (D-Nev.) don’t meet that test.
Balanced-budget amendment. The House passed its “Cut, Cap, and Balance Act” last week only to watch it go down in flames in the Senate. With good reason. Leave aside the complication of passing an amendment to the Constitution in this time frame. It’s simply not good policy because it constrains the federal government that robs it of the flexibility it would need to respond to unforeseen crisis, from war to natural disasters, to name a few. To continue to insist on its passage as a condition for raising the debt ceiling doesn’t make sense.
The United States is running out of time to raise its debt ceiling and, perhaps, avoid a downgrade of its credit rating. And this drama has ceased being a political drama that’s fun to watch from afar. Each day we click closer to default without an agreement is a day the American people and our economy come closer to getting seriously hurt.