U.S. to Hit Debt Ceiling- Again

Sometime after the battle over health care reform is over, for the 90th time in the past 69 years lawmakers are set to engage in another contentious debate, this one with a foregone conclusion.   

This fall, lawmakers will once again increase the national debt ceiling.  The debate will be highly partisan, but the outcome will assuredly be that the U.S will raise its credit limit by about $1 trillion.   

At $12.1 trillion, the national debt ceiling was just $349 billion away from being topped after unprecedented intervention into the financial markets that included $700 billion in bailouts and a $787 billion stimulus package.   

On August 7, the U.S. Treasury Department sent a letter to lawmakers warning them that another vote to raise the national debt ceiling was imminent.  Since that time, the economy has improved somewhat.  Lawmakers are hoping that this will allow them to put the vote off until later in the year and provide them with some political cover.   

"We're getting some signals that the economy is perking up a little bit so that we don't have to face (debt limit legislation) until maybe November," Finance Committee Chairman Max Baucus(D-MT) said, according to the ,Associated Press. 

Still, the vote is certain to be one fuel of political bomb-throwing.  As is typically the case, the party out of power will almost uniformly oppose any debt increase, calling it an undue burden placed on future generations.  

Even so, lawmakers have little choice but to go ahead with the debt increase.  Without it, the U.S. Treasury Department would be unable to pay the holders of securities when they came due, meaning that the U.S. would essentially default on its debt obligations. 

If that were to happen, it would send shockwaves through the world’s economies .   

"Our credit as a nation would plummet immediately and throw the world economy into a depression," Charles Konigsberg, chief budget counsel for The Concord Coalition, a deficit watchdog group, told CNNMoney.com. 

The debate and ensuing vote could, however, have major implications for President Barack Obama’s domestic agenda that includes a nearly $1 trillion health care reform package, cap-and-trade legislation and other forms of expanded federal spending.  In addition, the current White House budget projections estimate a budget deficit of $9 trillion over the next decade.   

“Passing a trillion-dollar health-care bill on top of a trillion dollar deficit won’t convince Americans that Congress is serious about reining in spending, and it won’t put our fiscal house in order,” Senate Minority Whip John Kyl wrote in the National Ledger.    

Click here to contact your Representative in Congress.

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