At least that’s what we were told by economists would happen if Congress did not raise the national debt ceiling.
On August 2, the United States spent all the money it was allowed to borrow by law, according to the last time the debt limit was raised in 2010. Congress has already passed legislation that promises to spend more money than the government is bringing in through taxes and other sources of revenue.
If we couldn’t have borrowed more than the current debt limit, some of those promises would not be kept — to Social Security recipients, to veterans, to contractors, to Medicare doctors, to soldiers. That default on obligations would have made any future borrowing much more expensive, would have caused banks and credit card companies to raise interest rates that we pay, would have caused the stock market to plummet, a financial disaster brought on by Congress itself.
That would have been a real crisis, but it was being caused by a fake one. The fake crisis is all the screaming by Republicans about the national debt. Our growing debt is a problem that needs to be controlled, but there is no debt crisis now. There is no reason why the debt limit could not be raised, averting any fiscal repercussions and allowing Congress plenty of time to find long-term solutions to the growing debt. Given the deep gulf between the parties’ conceptions of what government is about, that process needs time and thought.
In any case, the debt problem was caused by the same politicians who are screaming the loudest now. A useful measure of how much debt we have is the ratio of national debt to our total economy, the Gross Domestic Product. After peaking during World War II, the ratio of debt to GDP fell steadily until 1981. Since 1981, under a succession of Republican presidents beginning with Ronald Reagan, the ratio has risen steadily, except while the only Democratic president, Bill Clinton, was in office, when it fell.
Our national debt skyrocketed under George W. Bush — who more than doubled the debt — who brought faster growth than ever before. President Obama, who inherited two expensive wars and an economy in deep recession, has added $2.4 trillion to the debt; Bush added $6.1 trillion.
You won’t hear Republicans talking about how their own policies caused our problems. They look everywhere else for people to blame — teachers’ salaries, government employees’ unions, firefighters’ pensions. By spending us into a serious debt problem since 2000 and then creating an artificial crisis over raising the debt ceiling, conservatives have distracted public attention from today’s real economic crisis.
Our real crisis doesn’t make headlines because its victims are the most vulnerable, the poorest Americans. Unemployment has been 9 percent or more for two years, the longest since the Depression. Since World War II, the average time that unemployed people have been out of work never went higher than 20 weeks. Now it is more than 40 weeks. The nearly 10 percent of the American working population who are unemployed face a daily financial crisis.
Over 40 millions Americans qualify for food stamps, another record. One-quarter of our children are fed with food stamps.
Non-whites have been disproportionately slammed by the recession. The average white household lost 16 percent of its net worth between 2005 and 2009.The average black household lost more than half of their net worth, and the average Hispanic household lost two-thirds. In 2005, the typical white household had 10 times the wealth of a black family and seven times that of a Hispanic family. Now the median white household has 20 times their wealth. One-third of Hispanic and black households have no net worth at all.
These numbers represent a national crisis of inequality. Every day it gets worse, and no Republican economic proposal offers the poor anything but cuts to the programs which might keep them afloat. Conservatives insist that the wealth of the wealthiest must be protected from higher taxes, while proposing to cut unemployment benefits, Pell grants for students from poor families, Medicare and food stamps.
Our economic disaster is not about national debt, but about national poverty. America cannot be a great country, if we do not alleviate the critical economic problems gripping our poorest families.
Today’s fake political crisis might be the start of a real American crisis. The politicians have failed.
We voters must stand up for our fellow Americans, and for our nation.
Steve Hochstadt’s Blog