Christian Debt Recovery

National Debt Of Countries Worldwide

October 9th, 2007 |

Author: Gavin

national debt of countries worldwide

Why We Must Raise the Debt Ceiling

I know that for many of you—if not most of you—this sounds absolutely incredulous.

The United States already has a staggering debt load of more than $14 trillion and to now raise the debt ceiling which would in effect allow the government to borrow even more money must sound crazy. After all, shouldn’t we be doing everything as a country to reduce the amount our country borrows each year thereby reducing overall what we owe the rest of the world? And in a twist of irony that must have Stalin and Mao laughing wherever they are, we owe most of it to the Chinese.

I sat down this past weekend and planned my budget for the next three months and as I attempted to squeeze more out of less (old man inflation is not playing), I realized that our government currently borrows an almost unbelievable $100 billion each month just to keep the doors open and the lights on.

Before we go any further, let’s try to understand just what the debt ceiling is anyway. When you acquire a credit card, it usually comes with a specific dollar limit you are allowed to spend. Go over that limit and you will either pay a massive amount of fees for doing so or you will simply have your card declined.

The United States Government also has a credit limit but it is not set by those we borrow from. It is instead, set by the U.S. Congress which has passed legislation allowing the government to borrow up to a ceiling. Currently, under the existing law, that limit is $14.3 trillion. Our ability to get credit so that we can keep borrowing money is believe it or not, not relevant in this discussion because after all, we have laws that limit the amount we can borrow as a country.

So what is the fuss all about? The Republicans who have already shoved through Congress a $38.5 billion cut during the recent budget fight are now screaming that before they will approve any legislation that is designed to raise the amount the government can borrow, they want to see even more cuts in spending. While the verbiage is a little mean-spirited, and some of what they want to cut is even more mean-spirited, they unfortunately have somewhat of a point. More importantly, most Americans are coming around to their way of thinking on the issue of American debt because after all, who doesn’t worry about debt, especially the crushing debt our government owes its creditors today.

Despite the fact that the GOP has a point on this matter, any cuts that are taken need to be done sensibly and fairly. While I agree with some of what the Republicans are saying, my level of agreement is not total. That is, we must cut the budget as much as possible, but those budget cuts should first be a tax policy that will remove the subsidies to big oil companies and raise the taxes that are barely paid by the extremely wealthy. Cutting and/or eliminating programs like Head Start, affordable housing, tax credits for discovering and producing alternative energy sources, education, cancer research and other similar initiatives is not only NOT going to put a serious dent in our deficit, it may actually end up adding to it.

This is the reality: If we are unable to borrow more money because the U.S. Congress has decided to disallow borrowing at a higher level, then one of two things could happen:

Default: Let’s assume that we fail to raise the debt ceiling. Simultaneously, Congress fails to reduce the amount of money we spend. When there is no money, it has to come from somewhere. Possibly the cash could come from the payments our government makes to pay off our debt. This would be similar to each of us paying the minimum on the balance due on our credit card each month or worse, determining that we are not going to make any payments. This action would amount to hundreds of billions of dollars each and every year. By not paying, and allowing our debt to default, the government would then have lots of money to pay for everything else, including paying federal employees, paying for the military to operate, holding up Medicare and Social Security, and all of the myriad services Uncle Sam provides.Just as if you chose this option, there would be an unfortunate result. For us, as a country, the result would be very high inflation. Our creditors would rapidly come to the conclusion that if America could no longer honor its debts, then there would be an uncontrollable urge on their part to dump dollars and loans supported by the dollar onto world markets. This would of course, cause a tsunami of dollars worldwide, seriously devaluing our currency. When that happens, anything we purchased from other countries would quickly escalate in price. If you think $4.00 a gallon gas is an ordeal now, think of what $40.00 a gallon would do to your family.This super inflation would cause our country, and probably most of the rest of the world to plunge into a depression which would make the Great American Depression of the 1930s look like a birthday party by comparison.

Not to worry, there is a second option, raise the taxes and cut the benefits: Exercising this option would result in our continuing to pay off our debt in order to protect our currency from being trashed on world markets. Unfortunately, without the ability to borrow more money to keep paying off old debts—and this is where it gets tricky because it sounds crazy to do that—again, the money has to come from somewhere. That somewhere would be guess who? That’s right—you and me—the taxpayer.

Once again, the resulting scenario is not a pretty one. Now, the government would have to continue to pay down its debt, but in order to keep the government running while the debt is being paid down, we would have to cut programs and services that Americans have for the most part, come to take for granted. Our government expects to borrow approximately $1.4 trillion this year alone, so that means for the remaining eight months of the this year, somewhere around $871 billion more would need to be cut from the federal budget. This of course would have an immediate devastating impact on our economy, resulting in slashing Social Security payments in half, shutting all of our national parks down, firing the vast majority of federal employees and much more. It would, unfortunately be a disaster not that much different from the first option presented above.

The only conclusion I can come to is that as crazy as it sounds, option two is the lesser of two disasters. Consequently, each of us needs to contact our respective legislators and tell them you want them to approve raising the debt ceiling.

Correction: Last week I incorrectly cited the National Organization for Women (NOW) as the organization the Republicans were attempting to eliminate funding for in the federal budget. The organization they wanted to no longer fund is actually Planned Parenthood. As most of you know, the bid to eliminate Planned Parenthood by the GOP was unsuccessful. My apologies…

About the Author

I am a 62 year old married father and grandfather who lives in Wilmington, Delaware. As I approach the home stretch of life, I feel that myriad experiences I have had provides me with the perspective of one who has been there. This does not mean that I think I know it all. I eagerly look forward to learning something new each day, but more than six decades of life has taught me to share what I know, think and feel with others.