The current debate about the debt ceiling in Congress affects every household and business in Western North Carolina. It’s critical that our representatives in Congress understand that we want sound fiscal policy, not brinksmanship that threatens to damage our economy and undermine our financial stability.
A recent survey sent to his Western North Carolina constituents by 11th District U.S. Rep. Chuck Edwards can be deceptive without careful reading.
Before you respond, read the survey carefully.
The survey itself requires a “No” answer to support raising the debt ceiling, even though the subject line of the email would require a “Yes” response if you are in favor of taking this critical step to prevent fiscal calamity.
Our nation's debts come from past spending and tax bills. Responsibility for the current debt lies equally (50 percent each) with Democrat and Republican spending and tax policies. Both are equally responsible.
Blaming each other is a distraction from responsible fiscal policy.
Fiscal policy requires both responsible spending and responsible taxation. Continually cutting taxes on corporations and the wealthy is as irresponsible as pork barrel spending. The blame game and playing chicken with our nation's debt doesn’t solve this.
Our current debt is not a threat to our economic viability. Stalling the debt ceiling approval is a threat. The important number to follow is our debt to GDP ratio. That tells us if we can service our debt. Banks use this for households when granting a loan. We need to use the same number.
Most households, corporations, and businesses have debt greater than their revenues.
Our nation's debt to GDP is currently falling and was 123.4% last quarter. It was 123.6% the previous quarter and was 132.4% in March 2021.
The US is considered a responsible fiscal manager, so we can borrow at low interest rates. The Treasury interest rate is the risk-free rate because we are trusted to pay our bills. Threatening that trust in the United States will have big economic consequences nationally and globally. If you don’t pay your bills, it costs you more to borrow and you may not be able to borrow. The same can happen to a nation that fails to pay its bills.
Not only will economic chaos result if Congress fails to raise the debt ceiling, the action will also undermine our security, as Defense Secretary Lloyd Austin has warned.
"If the United States defaults, it would undermine the economic strength on which our national security rests," Austin said in a statement. "It would also seriously harm our service members and their families because, as secretary, I would have no authority or ability to ensure that our service members, civilians, or contractors would be paid in full or on time."
Congress needs to raise the debt ceiling. Then it can negotiate responsible tax and spending policies.
Susan Kask is a business and economic consultant and is retired from a 30-plus year career doing research and teaching economics.