Pay the country’s debt or middle class will bear the consequences
The debt ceiling brouhaha is set to come in December. Refusal to raise the debt ceiling is a subterfuge. The so-called debt ceiling does not allow bigger budgets in the future but, rather, is used to pay for debts already incurred. That includes our Social Security.
The Federal government borrows liberally from our Social Security Trust Fund at a low fixed rate. Therefore raising the debt limit is needed to pay our bill. But there is a double whammy as we pledge the taxing power to secure the bonds (debt) we issue which are paid at market rate.
So if the debt limit is not raised we not only have no money to repay Social Security but also our other creditors who are required to be paid first under the terms of our bonds.
Social Security recipients can not force prompt payment as they can not apply penalties and demand higher interest. Regular creditors can. And if they don’t want to lend interest rises, taxes rise artificially, and people lose their jobs.
The debt ceiling is unsound financial management. It’s a smoke job just like claiming the debt ceiling is meant to save money. Both, all, share the purpose of serving up out of context sound clips and block tax increases on the rich to repay the increased national debt.
But while tax breaks increase debt that debt is not like the two current targeted infrastructure bills. FDR, Truman, Eisenhower, Kennedy, Johnson, Nixon and Ford understood that investment in making life better for the middle class brings huge returns for all. Day care puts people in the job market. Many are economies of scale – like being able to take the bus to work rather than buy and pay for a car.
It’s like business not having to pay for hugely expensive health insurance but having more money to build factories and hire the people to run them. (Medicare gives the same service 25 percent cheaper due to lower overhead and being not for profit.) It’s like buying less oil and using the money to build.
Defaulting on the debt will costs jobs and risk recession. It means more decades of economic uncertainty for the middle class which gets sooner or later gets the bill.
We are finally being offered smart changes again – a New New Deal – and we should grab it.
It is so sad that so few remember this country’s heyday and how smart government investment and debt we paid for made it happen for all, not just a few. The goal was to be sure the infrastructure – physical and social – was in place so all of us could go as far as an individual’s will and talents could take him or her.
Conrad F. Cropsey