With a debt of over 14 trillion dollars weighing on their shoulders, the United States government is coming down to the wire in providing a solution for the nation’s economic crises and deciding whether raising the debt ceiling will help.
The debt ceiling has been raised 10 times in the past 10 years, so another increase wouldn’t be anything new, but Congress has still left the issue unresolved as to whether it should be raised again. The author of Fiscal Administration and IU Professor of Economics John Mikesell says the probability of Congress coming up with a proper solution isn’t looking good.
“It’s not an economic problem,” he said, “it’s not a fiscal problem; it is a purely political problem. Nobody is proposing anything currently that would actually reduce the debt. Every proposal coming from everybody anywhere will actually increase the level of debt.”
Ball State professor of Political Science Charles Taylor says politicians pass budgets and make decisions to spend more than what’s available in revenue, which increases the national debt.
“That’s why they periodically have to raise the debt ceiling,” he said, “because they run some level of deficit virtually always. From a political aspect, it allows Congressmen to basically vote for spending and imbalanced budgets and then come back later and make a statement against this large debt that we’re running up by voting against the debt ceiling.”
A commonly proposed solution to slowing down the debt’s increase is to raise taxes and decrease government spending, but IU Assistant Professor of Economics Todd Walker says that will do more harm to the economy than good.
“The deficits that we’ve seen in the last few years have mainly been a result of the recession,” Walker said. “The GDP results just came out this morning: first quarter GDP was revised .04%, so we’re on the precipice of another recession, and doing something drastic to government spending now is just going to push the economy into a recession.”
If Congress cannot come to an agreement, the nation will have its first ever default, which most agree could have disastrous results to the nation’s economy. Walker says a default could cause increased interest rates, which would not bear well with the current housing market or the looming possibility of another recession.
“Because the economy is so weak,” he said, “you’ve got the housing market that’s still weak; a lot of people are rolling over their mortgages. If interest rates go up, substantially because of a default event, the economy could very well go back into a severe recession. The politicians are playing with fire here, and it’s time to put the fire out.”
The government’s deadline for a decision is this coming Tuesday, August 2nd.