So it seems Congress, or at least the nihilistic wing of the House GOP, is gearing up for another fight over the debt ceiling. If you thought Debt Ceiling Fight I was bad, or for that matter that the Fiscal Cliff Fight was, I imagine you've got little stomach for this one. I feel for you. The facts are, though, this should not be a fight at all. This is a completely insane way for the House GOP to conduct themselves. Failing to raise the debt ceiling is, in essence, telling our creditors that we may not pay them back. It's defaulting. It's blowing up the "full faith and credit of the United States of America."
Let's get into why:
Firstly, the United States is not a household and its finances do not function like a household's.
This is why it doesn't actually need to balance it's budget. You can't take in less than you spend, but then, you don't have a sovereign currency, do you?
But this applies to the debt ceiling fight as well. When Congress "spends money" it does so by passing legislation that says "We will spend $1 billion dollars on project X." But neither Harry Reid nor John Boehner nor Barack Obama swipe the nation's credit card at that moment. The money is allocated and it is spent on the project when the project needs it (like after the plans are done and it's time to buy materials). This produces a delay between the time of "spending" and the time of borrowing that a household does not experience.
So people like to say that the debt ceiling is like a credit card's spending limit. That's sort of true, but it fails to take into account that you spend against your credit card in realtime, where the federal government does not.
When raising your credit card's spending limit, you are allowing yourself room for future purchases. When raising the debt ceiling, Congress is allowing itself room for purchases already made.
Raising the debt limit is NOT like raising your credit card limit, because you raise your credit card limit to spend more and the debt limit deals with spending Congress has already done.
It's calling your card company and saying "I just swiped my card to buy a $1000 TV, can you make sure my credit limit is $800 before this charge posts to my account?"
It's saying to those you owe (be it the card company or the poor guy at the TV store, "I have no real intention of paying for this."
But what's wrong with threatening government shutdown if the Senate won't get real about spending cuts?
First of all, it's a fallacy that this country has an existential debt or deficit crisis. We have a sovereign currency, so we can have a deficit. Also, most of the current deficit is a function not of the welfare state but of the recession (which you may recall was caused by deregulation of Wall Street, not welfare fraud or social security recipients living too high on the hog).
Some debt is necessary for the government to keep, the government's intention to pay (it's "Full faith and Credit") is what keeps the economy ticking in the form of Treasury bonds and the US Dollar. If the US Government paid off all of it's debts and deficits (not the same thing, btw) it would crash the currency.
But fine, let's agree for the sake of argument that spending cuts NEED to happen. If House Republicans were threatening a government shutdown until spending cuts were agreed upon, I'd be pretty upset but I wouldn't be apoplectic the way I am today. That's because what the House is talking about is NOT a Government shutdown. It's a detonation of the US Economy.
Refusing to raise the debt ceiling is nihilism. We're talking about investors foreign and domestic dumping US Treasury bonds decimating the government's ability to spend, raise capital, and probably issue a currency. We're talking about the US Government losing the ability to borrow money effectively at even 'acceptable to Republican levels.'
We're also talking about doing this to ourselves, thus pretty much permanently sacrificing the right of this country to hold itself up as a beacon of much of anything on the national stage. Once the global economy recovers from this cataclysm, no member of it is going to want to hear economic or governing pointers from the idiot who nearly destroyed it.
If this sounds extreme, that's because it is. What the Tea Party/Far-Right wing of the House Republicans are suggesting, and to a lesser extent even what their slightly-more-moderate Speaker is suggesting, is taking a hostage that they cannot afford to kill.
But as 67 House Republicans proved today in voting not to allocate $9 Billion in aid to displaced victims of Hurricane Sandy, this is a party that's capable of some pretty ugly shit to maintain their policy of non-compromise on fiscal matters.
Just look at your money and pray, because In God We Trust on this one.
Certainly not in the Grand Old Party.