It's all over the news. On August 1st, if the U.S. Federal government does NOT raise the debt ceiling, bad things will happen. The kind and amount of bad things vary with who you listen to, but include: complete or partial shut down of the Federal government, inability to pay debt, inability to pay entitlements like Social Security, stock market crash, higher interest rates across the board and a massive devaluation of the dollar.
It would be very, very bad. Not Mad Max or One Second After bad, but something that would be felt for decades to come.
And even IF Congress can come to an agreement and raise the debt ceiling (I think they will, personally), it will still be a temporary solution to the issue. And the government will still face the threat of being downgraded from AAA status, which could have some of the same negative effects.
The problem behind it all is not so complex. The U.S. government spends more than it brings in and is financing the additional spending with debt. It's not so different from a household living beyond its means. And like that household, in order to balance the budget, they need to cut spending or raise revenue. Government revenue comes in the form of taxes, and new taxes on a struggling economy is NOT a good idea, nor will it really resolve the core issues. The U.S. government is TOO big and, if given more money, it will only continue to grow.
So, that leaves the option of cutting away the fat. Like a household would pinch their pennies by cutting off the cable, cooking from scratch, and sewing clothing, the .Gov needs to cut spending to levels that their income can sustain. Governments don't usually cut spending very willfully, and the current administration shows little interest in cutting much of anything. So, we're in for interesting times until we can get a serious paradigm shift in Washington.
Anyways, what do you think we'll see happen with the debt ceiling? I make it a point not to offer many predictions here on T-Blog (thanks to the commentator who coined the nickname), but that doesn't mean I can't poll the tribe's collective thoughts.
