The existence of a debt ceiling is probably going to be our undoing. Not only can Congress not find reasonable ways to budget out the nation's finances...it then has to f-up its own ability to borrow money to finance its deficits.
Here is how Paul Krugman put it on PBS Newshour last night:
Where do spending and tax revenue come from? They come from bills voted by Congress. So, the way that the debt ceiling works is that Congress can actually vote to not tax enough to pay for the spending it proposes, and then it can refuse to allow the government to borrow the money to make up the difference between its own spending bills and its own tax bills. This is crazy. This is a license for continual irresponsibility.He's said this before about "government by blackmail" in his column and on his blog.
And, of course, we're heading for -- the Republicans are attempting to do government by blackmail. Don't -- give us what we want, or we will tank the economy. Nice little economy you have got here. Shame if something were to happen to it. And we can't run on that system. So we have to -- this needs to be taken off the table.
But it isn't the first time that this point has been raised before. In fact, the debt ceiling came about during WW1 over war funding. At that time the total debt issued was about $11.5B. This represented less than 20% of the GDP at that time. Interestingly, the limit was set to DOUBLE that number. And that is a good thing, as financial markets don't get spooked.
Today, the debt limit is closing in on 100% of GDP fast. And so is the debt. Which means, of course, that financial markets could finally start to doubt the ability of the US government to pay its own debts, not due to insolvency, but due to a broken political system. Oh, wait, that's happened already...and the standoff last summer cost us billions of dollars in additional interest on the debt due to Republican blackmail and intransigence.
As today's NYT editorial reminds us, they put out an editorial in the 60s imploring Kennedy to do away with this stupid political football, which serves no constructive purpose whatsoever. Football is a fun game because afterwards everybody gets to go home and resume their lives. Political footballs are not a fun game, because the consequences can impact us all for years to come.
