Joe Gilbertson | Jun 19, 2022 | 10
Democrats Refuse to Negotiate Debt Ceiling
As Democrats continue moving forward with massive spending packages they believe are necessary to kickstart the economy, Senate Republicans say they won’t vote to increase the debt ceiling unless Democrats agree to cut spending.
If a deal is not reached by July 31st, a debt limit suspended in 2019 will automatically go into effect. At this point, the Treasury Department will need to step in. It will have to pay the government’s bills while lawmakers continue to negotiate.
“Treasury is evaluating a range of potential scenarios, including some in which extraordinary measures could be exhausted much more quickly than in prior debt limit episodes,” says Brian Smith, deputy assistant secretary for federal finance. “It is very difficult to predict how long extraordinary measures might last.”
Lawmakers have acted more than 20 times in the past 30 years to prevent the government from surpassing its borrowing limit and defaulting on its loans. During that timeframe, the debt ceiling has jumped from $4 trillion to more than $28 trillion.
To force Democrats to negotiate, Republicans have made it a conference position to tie debt ceiling increases to spending cuts. This is the same tactic used in 2011 to impose funding limits through the Budget Control Act.
“Historically, the debt ceiling has proven the most effective lever point for enacting meaningful spending reforms and structural reforms,” says Texas Senator Ted Cruz (R). “We should use every tool we have to stop bankrupting our kids and grandkids.”
Not surprisingly, Democrats have refused to negotiate. They are likely to use the reconciliation process to increase the debt ceiling without GOP support.
The GOP position “doesn’t matter to me,” said Senator Chris Murphy (D-CT). “We don’t negotiate on the debt ceiling.”
“My preference on the debt ceiling is that we spend as little time and as little energy as possible,” added Senator Elizabeth Warren (D-MA).
If the debt ceiling increases and the Biden Administration continues its socialist spending spree, analysts expect to reach X Date. That is the date when the government can no longer pay its bills on time. It is sometime after October 1st.
Reaching the X Date “would realistically allow Congress to address the debt limit as part of an appropriations package and potentially pair that move with a longer-term reform of the statute to eliminate financial risk from these recurring episodes,” explains Shai Akabas, director of economic policy at the Bipartisan Policy Center in Washington, DC. “While uncertainty is perhaps greater than ever before, the way to minimize short-term financial risk remains the same: acting on the debt limit soon.”
The principle here is not difficult to understand. If you spend more money than you have, you go into debt. If you reach the point where you can no longer pay your debt, your money is no longer yours. Unfortunately, this is a reality for many Americans, but we’re talking about the federal government here.
The skyrocketing national deficit is an existential threat to America. Debt produces inflation, and we are no longer able to fight inflation by raising interest rates. If we tried to raise them, the interest on the national debt would overwhelm us. If we allow inflation to grow out of control, millions of Americans on fixed incomes will become poor overnight. Savings accounts will become worthless. Since the dollar is one of the world’s primary reserve currencies, dozens of third-world nations will suffer massive breakdowns in their economies and sink into Venezuela status. What comes around goes aground, the US will suffer massively.