By Patricia L Johnson
It’s not like they didn’t know the consequences, they knew.
As we all know, appropriation bills begin in the U.S. House and each and every member of the 112th Congress received a copy of the letter written by Secretary of the Treasury, Timothy F. Geithner regarding the statutory debt limit. His letter was written January 6, 2011, yet it took the ‘hell no’ Republican controlled U.S. House almost a full seven months to send a bill to the U.S. Senate. Did the Secretary of the Treasury leave it at one letter? No, he wrote one letter after another to members of Congress during the seven month period.
Had the Republicans simply increased the Debt Limit of the United States as has historically been done each and every time the debt limit in this country has been reached, our debt ceiling would not have been a worldwide topic of conversation, and our rating would probably not have been decreased by Standard and Poor’s. Members of Congress could have spent the balance of their terms in office arguing about what cuts could or should be made, yet they chose to use nothing less than blackmail to achieve their goal.
The full faith and credit of the United States was allowed to be left in the hands of those who have no apparent concept of the can of worms they opened with their lackadaisical attitude toward the debt limit.
The final deal that came out of Congress calls for a $917 billion decrease to the federal debt during the 10-year period from 2012 through 2021, if “appropriations are equal to the caps on discretionary spending and the maximum amount of funding is provided for the program integrity initiatives” according to the Congressional Budget Office.
The Republicans have caused a situation in this country that has never happened before in the history of the country. Our credit worthiness was downgraded by Standard and Poor’s on August 5, 2011 from AAA to AA+. What does it mean to you?
First, if the interest rate is increased on our debt by a mere 1%, the $917 billion decrease that was fought tooth and nail for, becomes a moot point because the decrease will be overshadowed by increased interest payments over that same 10-year period. That’s a loss for the country. Some money managers only invest in AAA securities which now leaves the United States out in the cold. That’s a loss for the country. It does not make any difference that the downgrade was based on some erroneous figures, the harm has already been done.
The following is from the statement Standard and Poor’s made when it downgraded our credit rating “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. “The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. Despite this year’s wide-ranging debate, in our view, the differences between political parties have proven to be extraordinarily difficult to bridge.” It’s bad enough we know how dysfunctional the 112th Congress is, now the entire world knows.
When Standard and Poor’s affirmed its AAA rating to AAA/Negative/A-1+ on April 18, 2011, the negative A-1+ represented a negative revision on its ‘outlook’ for the U.S., that should have been the key to the U.S. House to get off its duff and get the debt limit raised, but no – the party of “no” had its own agenda.
Secretary of the Treasury, Timothy F. Geithner practically begged Congress to increase the debt limit well before the August 2, 2011 deadline, yet the Republicans screwed around month after month and has all of us in the position where we are going to suffer financially because of their apparent ignorance on the subject of economics.
Treasuries represent the benchmark borrowing rate for all other sectors and an increase in the borrowing rate for U.S. Treasuries is going to raise interest rates everywhere else. State and Local governments, businesses and consumers are all going to be paying more to borrow money. Home interest rates will rise, credit card rates will rise, car loan rates will rise, etc., etc., etc.
How much will the $917 billion in deficit savings, cost the rest of us over the next 10 years?
© 2011 Patricia L Johnson