The common-sense-challenged Republicans blocking any resolution to the debt ceiling debacle evidently do not have the ability to see the ramifications of not raising the debt ceiling. At the same time, whether fair or not, Standard & Poors is threatening to downgrade the U.S. credit rating for future bond sales. The credit rating agency evidently wants to see something along the lines of President Obama’s $4 trillion debt reduction and revenue increase package as evidence of the seriousness of the nation in attacking future indebtedness.
Now, making comparisons between individual household budgets and the budget of a sovereign nation with a fiat currency – money issued solely on the full faith and credit of the nation – are not really realistic. However, such a comparison can occasionally clarify rather arcane matters. So, here goes.
If I find myself deeply in debt (over-leveraged) and have seen at the same time a steep drop in my income, I can pretty well be assured that my credit rating will decline and any additional money I borrow in the future will cost me lots more in interest. Plus, I just may find myself unable to get all the borrowed money I need to tide me over until my income gets back to normal. So, I could do several things. The best choices would be to cut my expenses in ways that are least harmful to me and get a second job in order to increase income.
Using similar logic, President Obama has recommended cutting $4 trillion over the next ten years ($1 trillion of that could come from ending the two Bush wars), while closing tax loopholes and/or raising income tax rates on the wealthiest among us, i.e., cut expenses and raise income. That course, which John Boehner seemed to be quite willing to pursue at first, was shot down by ideological Teapublicans with no common sense, aided and abetted by the pandering of Eric Cantor and Boehner, and by timid GOPers who are deathly afraid of being primaried.
If the credit rating of the United States is lowered, that would amount to a Republican-engineered giant tax increase on all of us, one we would pay every time we use a credit card, borrow money for any reason, try to buy a home. If Teapublican madness also forces a U.S. default, even if the President invokes the 14th Amendment to pay creditors, Social Security, and military pensions, they will also be responsible for creating another depression, all by themselves. Those are the stakes in the ridiculous game of clashing egos and absurd posturing we are being forced to watch in the House of Representatives.