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National Debt

The Debt Shuffle

  • May 04, 2011

    For months the American people have been hearing about how the Government's credit card bill is coming due. Unlike the American people, Congress has the option to increase the limit, and put off paying the bill. While lawmakers are still deciding what to do on the debt limit, Treasury Secretary Tim Geithner is beginning to play a shell game with our nation's finances. According to the Washington Post, Geithner has already begun juggling the books to conserve cash, draining a special account at the Federal Reserve. With the debt forecast to hit the legal limit of $14.3 trillion in just a few weeks, he has a range of tools at his disposal, including borrowing money from a pension fund for federal workers.

    Geithner also has authority to pay investors first for interest they’re owed on the debt, according to a decades-old legal opinion. A growing number of conservatives argue that by making interest payments first, the government could avoid default. However, this move comes at a price in the form of higher interest rates if it relied for long on such evasive maneuvers, the Government Accountability Office sahas stated. Furthermore, financial analysts say market confidence could be shattered if Geithner had to cut off pay to our troops or stop writing Social Security checks — even if he never missed an interest payment. So playing the shell game while Congress dithers has real consequences.
     
    As for how this will play out in Congress remains to be seen. Of late several newly elected Senators and Representatives, including Sen. Marco Rubio (R-FL) have stated that they refuse to participate in an increase in the limit without substantial reforms to how our finances are handled. Earlier this month all 47 Republican Senators agreed to an increase in the limit only if a Balanced Budget Amendment is attached to it. This Constitutional Amendment would require Congress to balance the budget each year except in times of war and other catastrophic events.
     
    While Capitol Watch applauds the efforts of these Senators to reach a compromise to preserve our stellar financial reputation, reforms must go further than a Balanced Budget Amendment. Reforms and cuts to spending on a massive scale must be included as well. Congress has to get at the meat of the matter, which is reckless spending. After all, voting to increase the credit limit of the government is a de facto vote for every pork barrel project, and trillion dollar deficit which has been added to the national debt over the past years.


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