The deadline is August 2. Democrats and Republicans must come to a resolution to raise the $14.3 trillion limit or the federal government could risk default.
While it seems the fitting close of a strong sales presentation, Obama on the other hand is not alarmed, for he is well learnt in the art of negotiation. His ‘hard bargaining’ tactics are evident. The 14th amendment is the only option. Debt is the subject of the day. An ‘asinine act’ is the phrase of description. The air is tense and charged with political rhetoric. There is indeed a lot of politics taking place in Washington.
Defined by political scientists and economists as the legal limit on borrowing by the federal government, the debt ceiling has now reached its hour of reckoning in American politics. Although history documents that, as America entered World War I, lawmakers agreed to give the federal government absolute approval for most types of borrowing as long as the total was less than an established limit in order to allow for more flexibility, it now seems that Republicans are holding this ideology hostage.
Despite the fact that debt is nothing new to America and the debt ceiling has been raised seven times during the Bush Administration, the Republican controlled House of Representatives continues its impasse. The cost of wars in Iraq and Afghanistan and new tax cuts instigated during the Bush years, accompanied by Obama’s economic stimulus and decreased tax revenue during the recession proves that debt has already been created, yet Republicans insist there will be no tax hikes on the American people.
Whereas centrists contend that the debt ceiling has now become a bargaining strategy by both parties intended to demonstrate Obama’s willingness to compromise and highlight Republicans’ refusal to raise taxes, proponents also see it as a powerful negotiation tool for Republicans. It is also deemed an opportune moment in time to make a strong stand to try to win back independents and appease the Tea Party.
Moreover, the failure to raise the debt ceiling by Republicans serves as an indictment of Obama’s leadership that will compound economic problems and help make the case for a new president in 2012. It also gives them the forum to garner publicity to fulfill their political agendas -- an act that malignly misrepresents reality, and presents a deluded picture that entirely fails to comprehend the needs of the American people.
But whether or not critics consider it an act of impeachment if Obama invokes the 14th amendment as a possible option, on the other hand, if the debt ceiling is not raised then the debt limit can also become a national security issue. Not only would interest rates and borrowing costs climb sharply, leaving a rocky perception of the US as a risky investment venture but devaluation of the US dollar would see the United States lose its position as the world’s reserve currency as its treasuries market slopes into chaos, opening the possibility to so many other mishaps.
It cannot be denied that there is a severe crisis of spending taking place in Washington and, according to Republican commentators, the president is in denial, but at the same time Washington can only work with compromise.
If Conservatives refuse to consider revenue increases and Democrats refuse to consider entitlement reform and the president’s reputation as a ‘communist’ continues to swell by some conservatives and as a ‘corporate sell-out’ by liberals, then this does nothing to solve the current unemployment rate of 9.2% or ease the economic and financial hardships that most Americans are presently entangled in.
For this reason, there must be common ground and invocation of political sacrifices by both parties to solve this economic clutter. Failure to act soon will push the United States back into recession and send shockwaves through the global economy. It will be impossible for the Treasury to pay the interest and principal on treasury bonds, military salaries and retirement benefits and payments of individual and corporate tax refunds will be frozen.
A US default would also create global economic chaos because US treasury bonds are held around the world, and the entire global financial system is based on the safety of US treasuries.
The debt ceiling cannot be ignored because it will not fade into oblivion and will cause greater grievances for succeeding generations if it is not forthwith addressed. There is no way out. Congress must raise the debt ceiling. “The debt of the United States government must be honored.”