Raising the Debt Ceiling

That the United States urgently needs a program to reduce its annual budget deficit is a given. That this should be done mostly by cutting spending, but also by rationalizing the tax code to eliminate outrageous giveaways - including, but hardly limited to, ethanol subsidies and, to kill some sacred cows, both mortgage interest and state tax deductions whose benefit goes primarily to those who need it least, is also reasonably obvious.

That these tasks are complex and will take time to complete is also true. If not done carefully, the Law of Unintended Consequences will govern and, as usual, it will do so to the detriment of us all.

Unfortunately there is a significant number of Congressional Republicans (mostly of the Tea Party variety) who seem to believe that allowing the USA to default on its obligations is perfectly acceptable. Some of them claim that no default will actually occur because the Treasury can manage the available funds so that interest on the national debt continues to be paid and maturing bonds are rolled over without the need to increase the national debt.

They are wrong: in August alone the ugly difference between expected revenue and scheduled expenditures is approximately $134 billion.

They are also right but only in a strictly technical sense. To avoid default on portions of the national debt, however, will require that others are not paid. What is a refusal to make payments, to recipients of Social Security, to doctors who treated patients covered by Medicare, to government contractors of all stripes, or to so called non-essential government employees who are furloughed, other than a default? That the government does not default on its debt is a mere technicality if it is also in default on other obligations. Who, then, will go unpaid?

To be a debtor is bad but to be a deadbeat is dishonorable.

These politicians should take a lesson from the millions of citizens whose houses, bought at the peak of the housing bubble, are worth less the mortgage balance. These people have not defaulted or mailed the front door keys back to the bank. Instead, they keep making their payments because it is the right thing to do.

They might also want to consider the case of President Harry S Truman. His haberdashery shop in Kansas City, Missouri, failed in 1923 leaving a pile of debts. When he became President of the United States in 1945, Mr. Truman was still making payments on those debts.

Most modern commentators would likely describe him as foolish for paying debts that he could have repudiated in bankruptcy court. That is a measure of our diminished morality. Your correspondent, on the other hand, thinks that he was an honorable man.

We urgently need all members of the House and Senate to recognize that there are two major tasks - and that there is no direct link between them. First, eliminate the possibility of a default and, second, set about the process of matching expenditure to revenue.

If our politicians refuse to act, then We The People, must ensure that they are duly punished at the next possible opportunity. November 2012 is not far away.