“To suggest that raising the debt limit doesn’t incur more debt is laughably absurd. The very reason why you raise the debt limit is so that you can incur more debt. Otherwise what’s the point?”
Sarah Palin
It is no surprise that Sarah Palin is breath-takingly stupid, but it is surprising, or at least really depressing, that most Americans think “raising the debt ceiling” means “borrowing more money.” In fact, 62 percent said that raising the debt ceiling meant “The federal government is increasing the amount of money it borrows to pay for future expenditures.” Even more GOP respondents felt that way: 73 percent.
It absolutely doesn’t mean that.
That fact that a significant number of Americans have no idea what the debt ceiling is, or why it would be FUCKING TERRIBLE if we didn’t raise it, is giving me nightmares. I assume many of my dear readers already know this, but it’s also an obscure and very poorly named government process, so in an effort to cheer myself up in the face of this impending doom, here are some explanations.
What is the debt ceiling?
Congress sets a budget, funding for all of the programs and expenses for the country, and the US Treasury pays all of those bills. In 1917 we limited how debt could be issued (like selling bonds), setting a “ceiling” for the Treasury, which has to keep being raised to accommodate the budgets. So basically, we vote to buy a bunch of things, we buy them, and then we have to vote again to see if we’re allowed to pay for the things we already bought. This is a great way for asshole politicians to say they support all the programs they like and then pretend to be against all the debt those programs cause.
Some conservative groups have compared this to going to the bank to ask for more credit when you’re already in major debt, but it’s actually like calling up your mortgage company and saying that, because you are in debt, you’re not going to pay your mortgage anymore. What kind of idiot would do that, right?! The GOP kind.
What will happen if we don’t raise it?
We default on our bills.
Why should I care about that?
Most of America’s “bills” are things for us. That means Social Security payments, veterans benefits and military pay, tax refunds, Medicare, and payments to any businesses that work with the government, those all stop.
Can’t we just pay the most important ones?
During a government shutdown, we can prioritize payments because agencies basically stop paying (some of) their employees. In a debt crisis, however, the Treasury is required to pay all of its bills, it just doesn’t have the money to do it.
The Treasury makes about 100 million payments a month, all on auto-pay, far too many to go through and pick and choose (even if the computer programmers there weren’t all furloughed because of the shutdown). If we don’t have the money to make the day’s payments, they just hold off until they do. That means if we are short tomorrow, we won’t be able to pay until Friday. This compounds with each day, of course, so after a couple of days we have to catch up on multiple days.
Bottom line: bills can’t get paid, services and checks stop, and we hurt our credit and the U.S. dollar.
What will happen if we hurt our credit or the U.S. dollar?
This is where it gets really juicy: we don’t know. This has never happened in the history of the world.* Because it’s crazy. Sure, other countries have defaulted, smaller countries, but never a country like ours. We are the largest economy in the world. The US dollar is the world’s (only) reserve currency. US Treasury bonds are considered risk free, the standard in investment. This stability, this reliability, allows Americans to borrow at lower costs, granting them an advantage of more than $100 billion per year. You save money on every loan just because you are American. It’s pretty important to protect that status.
So we don’t know exactly what will happen, but we know it will be really, really bad.
Bond markets rely on government rates as a price indicator, so interest on borrowed money goes up for everyone when Treasury interest rates increase. The housing market will almost definitely implode again. And it adds to our deficit; the 2011 delay will cost taxpayers around $19 billion in interest increases over the next ten years.
Also, it will fuck up our already weak job situation. Job growth in August of 2011, during the crisis, was the worst in almost three years. Because of the lack of federal spending, the current shutdown has created a fiscal contraction. A debt crisis will cause a contraction 10-20 times that. Ben Bernanke has said it could be a “recovery-ending event.”
Eh, they’ll figure something out.
I mean, sure, probably. The problem is don’t actually know when the Treasury will run out of money. We owe different amounts on different days, so it’s not as simple as a date. Additionally, even if we don’t get to the default, the threat of a default is still really, really bad.
Remember when Standard & Poor’s downgraded our credit rating? Here’s a reminder of why they said they did it:
“The political brinksmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed.”
Political brinkmanship, which is the 113th Congress’ middle name (One Hundred and Thirteenth Bullshit Brinkmanship Session of the U.S. House of Idiot Representatives).
Our credit is on the line, as well as our stock markets which like to freak out over stuff like this and our job growth, since people don’t like to hire when they don’t know what the hell is happening with their investments.
Whatever, I’ll just move to Canada.
HAHAHAHAthat is the beauty of this, we will not only fuck up our economy and our country, but we will fuck up the world economy! Because of all that stuff I said earlier about how great the dollar is. The whole world depends on us keeping our shit together. Go America!
Not to put too fine a point on this, but fucking around with our debt ceiling is batshit crazytown economic suicide.
Anyway. This was probably way too long, and mostly no one cares, but I’m full of anxiety. Spread the word or something. About the debt ceiling, not my anxiety.
P.S. My source for most of this is the Bipartisan Policy Center, a—you guessed it—bipartisan nonprofit that “drives principled solutions through rigorous analysis, reasoned negotiation and respectful dialogue.” So it’s legit, y’all.
*We have defaulted before, once during the War of 1812 and once in the ’70’s because of “technical defaults,” but those narrow lapses wouldn’t inflict the kind of damage we could see in this default.
Third Wave Wife 