I wrote this originally as a note on my Facebook page, but thought I'd share it here as well. I realize, of course, that I'm preaching to the choir here!
The Debt Ceiling Is Not Like the Credit Limit on Your Visa Card!
by Mark Kessinger on Sunday, July 31, 2011 at 2:21am
There is plenty I could rant about concerning the current standoff in Congress between the two parties concerning the deb ceiling, but I will spare everyone that and focus instead on a particular conservative talking point that seems to be raised in discussions all over the web about the debt ceiling.
All over the web in comments to articles about the debt ceiling fight, tea party conservatives ask the following rhetorical question-cum-talking-point: "If an individual maxes out his or her credit card and is having trouble meeting his or her debt obligations, should that person request an increase in his or her credit limit?"
At first glance, the question seems to make a certain intuitive sense, and can thus be a seductive way to view the debt ceiling debate. But it is a faulty analogy on several levels.
First, there is an important qualifier in the rhetorical question that renders it inapplicable to the nation's current situation: "...and is having trouble meeting his or her debt obligations..." is the operative phrase. As far as the national debt, the nation is not currently having difficult meeting its debt obligations. The size of the debt is a long-term concern that must eventually be addressed, but it is not the immediate crisis conservatives would have everyone believe.
Second, a credit limit on a credit card is a limit imposed by a creditor, based on how much risk that creditor is willing to undertake in light of the cardholder's credit history. The debt ceiling, however, is a self-imposed limit. So the analogous situation in a personal credit card scenario to the debt ceiling would be if a credit card holder who had a credit limit of, say, $10,000, and had maxed out at that limit, suddenly decided, on his own, that he was going to arbitrarily impose his own credit limit at some level below the total amount of charges he had already made—let's say, at $7,500 for the sake of argument—and simply refuse to accept that he had already racked up $2,500 over that amount and refuse to pay those charges. Try that sometime, and see what happens to your credit score. And see what happens to the cost of any future borrowing or indebtedness you might choose to undertake at a later time. That, in a nutshell, is what the economically illiterate Tea Party Republicans are really playing with.
The revenue (tax) and spending decisions that have brought us to the debt ceiling were already made, and those debt obligations already incurred. Failure to raise the debt limit -- something that was done 18 times under Ronald Reagan and 7 times under George W. Bush -- amounts to the United States simply refusing to meet the obligations it has already committed itself to.
Of course, this bit of misinformation partakes of a much larger myth -- actually a two-part myth -- that much of the public has been sold. That is, of course, the suggestion that the federal government should balance it's budget just like the vast majority of American households do. The first bit of fiction underlying that notion is that managing a nation's economy (macroeconomics) is the same thing as managing a household budget (microeconomics). The two are not at all the same thing, as any reputable economist will readily tell you.
The second fiction embedded in this notion is that the majority of American families "balance their budgets." This is frankly a bald-faced lie. The vast majority of Americans manage a considerable amount of debt -- mortgages, student loans, car payments, credit card debt. In fact, many American families manage a level of debt that is considerably higher (as a percentage of annual income) than the current national debt (as a percentage of annual GDP). If the average American family were to impose the household equivalent of a "balanced budget amendment" (with which the Tea Party conservatives are attempting to saddle the nation), that would mean they wouldn't own homes or cars, and far fewer of them would have been able to afford any form of higher education.
Debt—even the national debt—is not inherently a bad thing. And before people jump on the "Balanced Budget Amendment" bandwagon, perhaps they should consider how that would have played out in our nation's history if such an Amendment has been in existence. For one thing, if the Continental Congress had been subject to such an amendment, the colonies could never have financed the Revolutionary War. If Lincoln had been subject to such an amendment, the Union would never have survived the Civil War because it wouldn't have been able to finance the Civil War. All those bridges and highways and other infrastructure projects that were built by the WPA and the Civilian Conservation Corps—projects that both met a need for such infrastructure and enabled millions to eat—couldn't have been built. Neither could the Interstate highway system. Oh, and you can forget about the country being able to mobilize for WWII -- it could never have happened. So before we hamstring future generations' ability to respond to the crises of their times as they see fit, perhaps we should consider what and where this country would be had our forebears been so constrained.
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