Losing Sight of What’s at Stake
Jul 19, 2011
By Amit Jain
Economists from across the political spectrum warn of catastrophic consequences if Congress fails to raise the debt ceiling before August 2, after which the U.S. government will lack the funds to meet its obligations without borrowing more.
But as this deadline approaches, many members of Congress continue to use it to extract unconscionable funding cuts. Some have publicly expressed doubt that the ceiling needs to be increased at all. These legislators claim that the Treasury Department could harmlessly prioritize interest payments over other expenses to avoid a debt default, despite Treasury Secretary Timothy Geithner's insistence that such prioritization would be a logistical impossibility. Still, even if default could be avoided, a recent report by the Bipartisan Policy Center confirms that these lawmakers are wrong: failing to raise the debt ceiling would be catastrophic for all Americans, especially the low-income families bearing the brunt of the economic downturn.
Jay Powell, coauthor of the report and former Under Secretary of the Treasury for Finance under President George H.W. Bush, spoke to the House Republican Conference last Friday about the dangers of failing to raise the debt limit. From August 3 to 31, the report states, the Treasury would accrue a cash shortfall of $134 billion, or 44 percent of spending. As an illustration, it notes that government revenue would be fully exhausted by interest on the national debt, defense contract payments, and benefits for recipients of Social Security, Medicare, Medicaid and Unemployment Insurance.
In other words, if Congress does not raise the debt ceiling, just meeting those few obligations would consume all the nation's resources and require defunding all other government programs and services, including such critical components of the safety net as the Supplemental Nutrition Assistance Program (SNAP), child nutrition programs, Temporary Assistance for Needy Families (TANF) and low-income housing assistance. This failure would additionally decimate programs that help broaden educational opportunities and revitalize our economy, including Pell grants for low-income college students and workforce investment and training programs. Military salaries, veterans' benefits, small business loans, public education, homeland security, energy and environmental investments would also lose all federal funding. These devastating cuts, which fall far beyond any changes in even the most draconian budget proposals, would halt our slow economic recovery and destroy countless investments in our nation's present and future.