Last Modified: Wednesday, January 16, 2013 6:55 PM
There’s been a lot of scare talk going on about a possible default on the national debt and of a government shut down.
President Obama exacerbated the problem at his Monday news conference by declaring he would not even discuss the matter with the House of Representatives, which is under Republican control. House leaders have said they want to negotiate a cut in spending before they give the go-ahead on raising the national debt limit. Obama wants an increase in the debt limit, which was reached late last year, without any spending limits or negotiations. The Treasury Department is using various funding sources to keep the money flowing into the government until the end of February.
The national debt is at an all-time high of more than $16 trillion, and 40 cents of every dollar spent by the federal government is borrowed money. House leaders want to get the spending and the debt under control, certainly a reasonable position.
Obama, at his news conference, accused the House leaders of “holding a gun” on the nation over the debt ceiling issue, and threatened dire consequences for the country if his demands were not met. He also accused the Republicans of wanting to make the U.S. a “deadbeat” nation.
Such scare talk, threats and accusations only makes reaching a reasonable agreement more difficult.
J.D. Foster, an economist with the Heritage Foundation, a nonpartisan Washington think tank, brought some commonsense thoughts to the issue in a recent article.
He noted that a default on the national debt is an utterly implausible eventuality. Because the government has money constantly coming in, the only way a default on the debt could occur would be if the Treasury Department chooses to default.
“The amount of debt the federal government is allowed to issue is set by statute. Federal spending is similarly established by law. Treasury is at once prohibited by law from issuing additional debt above the limit and obligated by law to spend certain amounts for designated purposes,” he said. Foster said that if the debt limit is reached, and not extended, the federal government would still be able to spend money and pay its debts.
With regards to a government shutdown, it means certain government functions are suspended, not because of a lack of money, but because it lacks authority.
“Further, a government shutdown applies to those activities funded by what is called ‘discretionary’ spending, essentially the day-to-day operations of the government, as opposed to entitlement spending such as Social Security and Medicare,” Foster said. Under such circumstances, Treasury would have to limit spending by prioritizing government obligations, he noted.
On the other hand, Fitch Ratings warned Tuesday that the United States could lose its top credit rating for the second time from a leading agency if there’s a delay in raising the debt ceiling.
Congress has to increase the country’s debt limit, which effectively rules how much debt the U.S. can have, by the end of February or face a potential default, Fitch says.
If the debt rating were downgraded, the U.S. would face steeper costs when it comes to servicing its debt.
All this can be avoided if the president would simply negotiate in good faith with the House leadership to reach a reasonable agreement, as he is required to do under the law, the Constitution and his oath office. Threats, accusations and refusing to negotiate is poor management and a failure of leadership.
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This editorial was written by a member of the American Press Editorial Board. Its content reflects the collaborative opinion of the Board, whose members include Bobby Dower, Ken Stickney, Jim Beam, Crystal Stevenson and Donna Price.