NYT: The Debt Alarm Is Heard

[babylonsister]

Editorial
The Debt Alarm Is Heard
Published: July 14, 2011


As negotiators in the debt-ceiling talks sputtered and raged, the chill reality of an imminent government default crept up Wednesday and made a mockery of their gamesmanship. Two major rating agencies warned that a once-unthinkable downgrade of the nation’s credit rating would be at hand if this crisis was not immediately defused.

That finally punctured the careless notion, popularized by Tea Party lawmakers like Michele Bachmann and Louie Gohmert, that default would be a minor inconvenience. Standard & Poor’s said a downgrade could occur if any required payments were missed, even if bondholders were paid first. Moody’s said a new process for dealing with the debt ceiling was needed. Although the bond markets have yet to be roiled, there are fresh indications that China and other investors are beginning to get nervous.

The alarms could not be much louder, but myth-making is still impeding the desperately needed deal.

Many House Republicans persist in acting as though they are doing President Obama a favor by considering a debt-ceiling increase at all, and that in exchange they should get all the spending cuts they want. In fact, the debt ceiling is an artificial method of keeping an eye on borrowing that Congress itself imposed nearly a century ago. The president didn’t “ask” for an increase; he simply reminded Congress that the authority to continue borrowing had run out because of spending already incurred, largely because of wars, the recession, growing entitlement programs and the Bush tax cuts.

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http://www.nytimes.com/2011/07/15/opinion/15fri1.html?_r=1