This past May Treasury Secretary Tim Geithner told Congress he would have to put off reserves in federal retirement funds until Aug. 2 to create room for the government to continue borrowing in the debt markets. The funds will be restored once the debt limit is increased, Geithner stated in a letter. “Federal retirees and employees will be unaffected by these actions.” He also urged Congress to raise the legal borrowing limit to protect and credit the U.S. and avoid catastrophic economic consequences for Americans.
Congress did not showing any signs of budging as both Republicans and Democrats stated they won’t raise the debt ceiling unless Congress and President Obama agree to spending cuts and ways to curb debt spending provided law makers agree. If lawmakers don’t get it together before the August 2 deadline, the U.S. will no longer be able to pay its bills.
Taking measures like putting off reserves in federal retirement funds Geithner stated “will be able to bring total debt down enough to allow the government to continue borrowing until Aug. 2.” Congress has already passed and the president has already signed legislation this past August 1st that increases spending or decreases revenues. Those decisions have already been made. So in reality arguing over the debt ceiling is arguing over whether to pay the bills the U.S. has already incurred?
How many times has the ceiling been raised? Since March 1962, the debt ceiling has been raised 74 times, according to the Congressional Research Service. Ten of those times have occurred since 2001. President Reagan raised the debt ceiling 18 times under his administration and Bush 7 times during his administration.
Since the history of debt spending dating back to 1917, Congress have always agree to raise the debt ceiling every time they voted for spending increase or tax cuts. We can expect more of the same over the next presidential election and beyond. So why does Congress set a debt limit? The limit is supposed to help Congress control spending. In reality, it doesn’t. The main question is what does this accomplishes?
The House of Representatives and the Senate passed a bill that accomplished the following:
■Approved legislation to raise the U.S. debt limit by at least $2.1 trillion and cut federal spending by $2.4 trillion or more, with a number ofrequirements.
■There are no obvious tax increases in the legislation.
■The debt ceiling is raised in two installments, allowing the debt ceiling to extend into 2013, therefore sufficient to serve the president’s election needs for 2012.
■Provides indeterminate cuts of $917 billion in spending over the next decade.
■Raises the debt limit initially by $900 billion.
■Assigns a special congressional committee to find another $1.5 trillion in deficit savings by late November of 2011, to be enacted before Christmas.
■Commits Congress to take a balanced budget amendment vote by November of 2011.
■Requires the special congressional committee to find an additional $1.5 Trillion in budget cuts by November 2011.
■If Congress passes the balanced budget amendment or passes the additional $1.5 Trillion in spending cuts, the debt ceiling is increased by another $1.5 Trillion which means another debt ceiling raise in 2012.
■If Congress doesn’t pass either the Balanced Budget Amendment or provide for an additional $1.2 Trillion in cuts, that would trigger automatic spending cuts across the government — including in defense and Medicare to take effect starting in 2013, and still raises the debt ceiling by another $1.5 Trillion.
So what happens next? It looks like the U.S. Government will fall into a hole with no end in sight and no recovery because nothing is being generated to offset spending. The Clinton administration cutout wasteful spending, had a wealth tax in place, technology and pharmaceuticals lead to economic prosperity. President Barack Obama administration is in a deep hole from which it may not recover. No business has proposed a real plan to put the U.S. Government on to a solid financial footing for a surplus. Ten years is a long time for economic and financial recovery.