Polls show the nation growing impatient. The public wants Washington politicians to get a deal done now to raise the debt ceiling and open the government. Rushing is a mistake. The urgency of the debt ceiling is exaggerated, while the drastic consequences of a deal that fails to curb spending are being ignored.
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Here are three reasons not to rush a settlement:
- THE U.S. WILL NOT DEFAULT ON ITS DEBT THIS WEEK OR ANYTIME SOON.
On Oct. 7, Moody’s rating agency circulated a memo on Capitol Hill explaining “there is no direct connection between the debt limit (actually the exhaustion of the Treasury’s extraordinary measures to raise funds) and a default.” First of all, “there are no interest payments until the end of the month. … Thus, a Treasury-based default is not technically possible until that date.”
Secondly, “the government is very likely to prioritize interest payments,” meaning servicing the debt before paying other bills. Backing up Moody’s analysis, Fitch Ratings, a credit ratings company, called the default “a low risk.”
Yet Rep. Peter T. King, R-N.Y., said “We’re now backed into a corner. We have to do this by Thursday. We have to make it work, but it’s not going to be perfect.”
No one expects perfection in politics, but Republicans should be fighting to keep the “savings” they gained in 2011, in exchange for agreeing to the largest debt ceiling hike in history.
- BREAKING THE SEQUESTER IS DOUBLE DEALING AT THE PUBLIC’S EXPENSE
As the pressure to make a deal intensifies, Democrats in Congress are demanding a rollback of the “sequester.” This means that the mandatory spending cuts over 10 years that President Obama agreed to in 2011 in exchange for a whopping $2.1 trillion debt ceiling hike.
President Obama has used up the $2.1 trillion in borrowing authority he bargained for, and his party — the pro-spenders — wants to renegotiate the mandatory spending cuts in that 2011 agreement. That’s the way it often happens in Washington, D.C., and it’s why the nation is already facing a $16.7 trillion debt. The borrowing goes on, and the promises of future fiscal restraint are broken. When the sequester was agreed to, Speaker of the House John Boehner sold it to the nation, saying he got $1 of spending cuts for every dollar of the debt hike. Not quite. He got a penny of spending cuts immediately, and the rest were promised to occur later. But after two years of spending restraint, the Democrats are backing out.
Suppose you sold your house to your neighbor and he agreed to pay for it over 10 years. Then in year three, he came to you and said he was going to stop paying unless you also handed over your car. That’s what’s happening here.
According to the deal President Obama struck in 2011, federal spending should be reduced to $967 billion from its current $986 billion on Jan. 15. But Senate Republicans are discussing raising the debt ceiling again this week with no guarantee that those cuts promised two years ago will be honored. House Republicans should insist the cuts stay. More spending means more debt in the future, and more debt means less freedom for ourselves and our children.
- WHEN THE INTEREST-RATE HONEYMOON IS OVER, THE U.S. WILL FIND ITSELF IN DIRE CIRCUMSTANCES
If the U.S. government had to pay the same interest rates today as in 2000, the national debt would be over $20 trillion already. Unprecedented low rates have allowed the nation to escape the full impact of the current debt. The average rate paid for government obligations, a tiny 1.98 percent (a third of what it was in 2000) will go up. When it does, servicing the debt will claim far more than the current 10 percent of tax revenues. Rising rates will force the nation to raise taxes and/or cut services. The more debt is loaded on because of this new negotiation, the worse the future debt-service crisis will be.
The dealmakers should be exploring sensible ways to curb spending. The Government Accountability Office has detailed $250 billion in duplicative federal spending — meaning two offices or agencies doing the same thing at double the cost. The dealmakers should also consider selling federal assets. If you were deep in debt, you’d start by selling the speed boat in your backyard and unloading the extra car in your driveway. The federal government owns one-third of all acreage in the U.S. Last week, the Obama administration flexed its muscle and forced private businesses located on leased federal land to close due to the shutdown. Much of this land could be sold, without diminishing parks and national treasures, to pay down federal debt and reduce federal power. It’s common sense. Rushing a deal will doom our children to Obamatude — taxpayer slavery to pay Obama’s trillion-dollar annual borrowings.
Betsy McCaughey is a former Lt. governor of New York and the author of “Beating Obamacare.”
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