Excessive spending gave way to skyrocketing debt and skyrocketing debt gave way to, well, more skyrocketing debt. A $2.4 trillion increase in the federal debt ceiling, although a significant fraction of our current debt, just delayed an inevitable confrontation with the United States’ spending problem. It’s no wonder that Standard and Poor’s found the country unfit to uphold a its pristine AAA credit rating.
In its overview of the U.S. credit downgrade, S&P stated that a sole concern of theirs was that the extended controversy regarding the debt ceiling indicates that “further near-term progress” on arriving at an agreement is less likely than originally thought.
Hard choices lie ahead. Entitlement programs, unemployment and extreme partisanship all take equal responsibility for burdening the U.S. with a long and sacrificial road to regain AAA status.
Programs like Medicare, Medicaid, and Social Security absorb tax revenues and still operate at a colossal financial loss. In fact, these programs between now and the next 75 years are projected run a deficit of $30.9 billion, according to the Government Accountability Office.
In addition, the high unemployment rate makes for more conservative expenditures, which stifles the economy. Finally, Congress, in an exceptional display of partisanship, played a classic game of tug-of-war in response to the debt crisis.
S&P noted this partisanship in its overview of the credit downgrade, saying, “the political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed.”
So, in light of a hasty solution to the debt crisis, what can be the expected outcome of this credit downgrade?
The congressional solution to the debt crisis was the “The Joint Select Committee on Deficit Reduction” composed of six Republicans and six Democrats. According to the White House website. “super committee’s” mission is to find $1.5 trillion that can be cut from the budget.
The thought that this group of 12 members of Congress, who are supposed to be representative of a rather unruly bunch, have unrestricted authority to cut spending, eliminate tax loopholes, and increase government revenue is alarming, especially when such changes will play a significant role in deciding the stability of the U.S. credit rating.
Unfortunately, that’s not the scariest part. If seven out of the 12 members can’t agree on significant spending cuts, Congress pulls the “trigger,” which would enact spending cuts in areas dear to each party’s hearts: public programs for the Democrats and defense for the Republicans.
Most agree that raising the debt ceiling was the lesser of two evils when faced with defaulting on government loans, but in the process, Congress dug further into an already deep hole. Smart sacrifices must be made and the super committee must reach a deal or else the trigger will cause this country to cut national defense spending in the midst of two wars.
This illustrates a much larger, much deeper problem the country faces that has little do with credit ratings. The U.S. is sick and ill-governed. Funding has been overstretched and instead of curtailing massive government expenditures, the spending has accelerated. Now, the country has begun paying the price for irresponsibility and selfishness.
Reach the columnist at lweinick@asu.edu
