Why none of this debt-ceiling stuff matters. Volume I: This Stuff is Boring (but with tractor cat).
So, who else is tired of all the “debt-ceiling” nonsense? It’s time like these I’m glad I no longer have cable. It’s also times like these that I remember why everyone hates politics. It doesn’t really have to be like this, but no one believes anyone about anything anymore. Seriously. How do we know who’s telling the truth? I, for one, only trust me. So, for the three of you out there who also trust me, let’s review.
Our govt. is about $14 trillion and some change in debt. That’s debt to China, Russia, and others. We borrow that money so we can spend it on things like the military, social security (more in Vol II), and how a gay man’s unit corresponds with his self-esteem (don’t believe me? try google). We also have what’s called a debt ceiling, which is supposed to make us feel like Congress is constrained from borrowing loads of money. Unfortunately, Congress routinely authorizes its raising (so we can borrow even more). All of the to-do lately has been about raising the debt ceiling again. The trouble is that it looks like we finally elected people in the House who are actually willing to continuing fighting the out of control spending. Thus, you’re hearing those on both sides of the aisle call the other side terrorists, and nazi’s, and purveyors of stinky cheese. The rhetoric has become so absurd, in fact, that I was actually told by a liberal radio show host that we don’t need a balanced budget amendment because it would be an admission that Congress can’t control itself.
So..what really happens if we don’t raise the debt ceiling? Honestly…who knows. You’ll hear answers ranging from “nothing” to “we’re all going to be absorbed by an amorphous black mass.” As with everything else, the answer resides somewhere in the middle. Our debt, while high, doesn’t take up every penny of revenue. So, even if we don’t raise the debt ceiling, we’re unlikely to default. We’ll simply prioritize our spending…so our creditors will get paid, while other stuff won’t. Barry will determine who doesn’t get paid (options like closing the National Parks have been floated).
The only reason I have actually identified as to why not raising the debt ceiling matters is those stupid rating agencies like Moody’s and S & P (who you may recall from such past performances as horribly overrating mortgage-backed securities which helped cause the economic collapse). These folks try and make determinations as to what is a good investment risk, i.e., who’s most likely to pay you back. Places that are good risks get things like lower interest rates on loans. The best rating is AAA…which we currently are. Because of that rating, we get to borrow money from China at decent rates. If our rating drops to, say, AA…our interest rates go up…which leads to wasting more money on interest (the interaction between rating and interest rate is similar to your credit rating and getting a credit card with a decent interest rate).
If you’re still with me, you’re either (a) angry you wasted the past few minutes reading all of this; or (b) yelling “we have to raise the debt ceiling or else our rating will drop!” Here’s where I say none of the crap going on in Congress right now matters, so you can quit yelling.
Look, we’re going to raise the debt ceiling. There’s no doubt about it. Even if we don’t, however, both Moody’s and S & P said they won’t lower our rating from AAA to AA. Here’s the point though: they’ve also said simply raising the debt ceiling won’t impact their decisions to lower our rating. Why? Because regardless of what we do with the debt ceiling, we’re still well on the way to financial ruin.
This is where I leave you at the cliff-hanger, desperately waiting for Vol. II. Don’t worry. It’s coming.