My Credit Card
So let’s say I take out one of my credit cards and buy something extravagant – a new car for example. Once I’ve made the purchase, I’ve committed to paying that bill, including the interest on the credit card. If I don’t like paying that interest, I might (if I’m smart) find some more fiscally sound way to finance the car, an auto loan perhaps. But whatever I do, I bought the car, and unless I sell it or declare bankruptcy (and lose the car anyway) I am responsible for the bill.
Responsible individuals budget their spending, take into consideration how their income, and how much debt they’re willing to carry. But not the United States Congress.
The Dam Bill
The process of US Government spending is already complex. The annual budget of the United States is measured in volumes and pounds rather than pages. And each of those expenditures has to be passed by the Congress, in fact, passed four to six times!!
In my senior Government classes, we used the example of the “Dam Bill”. A dam is needed, to hold back water, to control flooding, and to generator hydro-electricity. So a Congressman (or Senator) introduces a bill to build it (“I’m just a bill, oh I’m only a bill, and I’m sitting here on Capitol Hill”
).
The bill is sent to the committee that deals with dams, the Dam Committee. That Dam Committee will hold hearings about the dam, determining what’s needed, and what the dam drawbacks might be. Perhaps there’s a particular town that might be flooded by the dam, or a fish that might not be able to mate. So there will be Dam Hearings, and the committee will make a dam decision. If they determine that the dam is needed, they’ll send the bill to the full House to vote on it. When the House passes the Dam Bill, it moves onto the Senate (or vice versa), and the process goes on again, dam hearings, dam decisions, and dam votes.
If both the House and Senate pass identical Dam Bills, then it becomes law (that’s two votes). But if there are differences, they need to negotiate a single bill, and both pass the Dam Bill again (that’s four votes). And once it’s all done – the President would have to sign it.
The Dam Money
And that’s it – right? Oh no, there’s a Dam Law (a passed bill) but there’s no Dam money to build it. So the process will begin again, this time required to start in the House, and they’ll have a dam money hearing, debate, and vote (that’s five). And the Senate will have to agree, six votes to get the Dam Law and the Dam Money Law so they can build the damn dam.
The government has trillions of dollars in taxes ($4.9 trillion last year) to build the dam. And of course, the costs are spread out over years, it takes more than one to build a dam. If the government spends more than that (2022- $6.7 trillion), they borrow the money, just like using that credit card for the car. The government borrows in lots of ways, mostly by selling bonds (long term fix interest loans). That creates a national debt, just like the credit card, car loans and mortgages regular people have. The national debt, the total amount the government owes right now, is $31.34 Trillion. The difference is that the government, unlike my credit card, doesn’t have a limit set by the credit card company.
The Limit
If the government wants to cut spending, they had six different opportunities to decide not to build the dam. But our Congress has an artificial way to create a crisis. They have set up their own self-imposed “credit limit”, called the “debt ceiling”. It sets a ceiling of how much debt the US government can carry. If I buy a car on my credit card, and it’s more than my credit limit, the card company denies my purchase. But when the government passes the Dam Bill, they know exactly how much it will add to the debt. Still, if it puts the debt over the limit, there’s nothing to stop them from doing it.
They can always raise their own credit limit, by lifting the debt ceiling. And that’s where we are today. The current debt limit is $31.381 Trillion. The US Government is expecting to hit that limit on Thursday (US Treasury). If the Congress doesn’t raise the limit by then, the US could default on its debt – not pay the interest on all of the loans (bonds) that were issued.
Default
If I don’t pay my credit card bills, the credit companies come after me. They can ultimately take me to court to try to recover their losses. If the US Government doesn’t pay its bills, there’s not much anyone can do – except not ever buy US Government loans again. And that would create an economic catastrophe; an artificially created recession with higher unemployment, interest rates, and potentially more inflation. It would (will) be a mess, all because instead of Congress deciding to not build more dams the several times they had the chance, they failed to raise their own credit limit instead.
This sounds like a stupid idea. And realistically, while the “deadline” is Thursday, the Treasury Department can finagle the books to stretch things out until May.
Kevin’s Box
But here’s the real issue. The House of Representatives is run by the Republicans, with Kevin McCarthy as Speaker. To get elected Speaker, McCarthy gave every single Congressman the right to call for a vote on his job. It took fifteen separate votes for him to get his own Party to elect him. There are about twenty Republicans who held McCarthy’s dream hostage until they got everything they wanted. And one of those things was to hold up the debt ceiling vote until the Government cut spending.
Now it’s a lot harder to cut spending after it’s been spent, than it is to not spend it in the first place. But that’s what the twenty want to do. And they’re willing to go to the edge of economic disaster to get it. To actually cut the debt, the House, the Senate, and the President would all have to agree. They’d have to let the twenty hold the whole Government and the US economy hostage, and then give in.
And if McCarthy looks to Democrats to help him pass a debt ceiling bill, then any one of the Congressmen, from Matt Gaetz to George Santos, can call for a new Speaker election. And if five Republicans refuse to vote for McCarthy, he’s out, and the House is back in chaos. So don’t be surprised that, if not now, in May, the US Government shuts down, unable to pay its debts. Because Kevin McCarthy wanted to be Speaker so badly, he negotiated himself into a box. The few, the five, the “crazies’; control McCarthy’s future, and unfortunately, the future of the Nation.
And that’s a damn shame.
