On August 2, 2011, the full faith and credit of the United States of America will be damaged. On this date, the USA will more than likely be downgraded in their credit rating by Moody's and Standards & Poor's and this will have a direct impact on us. The most immediate will be that interest rates on loans and mortgages will go up. For example, a home appraised at $200,000 will see the mortgage payment increase by $400 per month on a 30-year fixed rate mortgage.
We learned on July 25th that the wealth disparity in America has widened between white Americans and minorities in America. The ratio is 20:1 between whites and Blacks and 18:1 between whites and Hispanics. During the Clinton administration, the ratio was 7:1 with both groups. This is significant because the wealth gap will increase if the National Debt Ceiling is not raised by August 2nd. White families will see their wealth decrease, but minorities will suffer more from the higher interest rates.
There are two options that can happen. One, the US Congress can totally eliminate the debt ceiling altogether, thus allowing Congress to borrow money when needed without worrying about reaching any self-imposed limit. The negative side of that option would be the historical lack of self-discipline Congress has shown in spending the taxpayers' money.
The other option would be the one that has been exercised 20 times over the last seven years: Set a new debt ceiling rate to continue to allow the US Government to borrow the money needed to fund obligations and maintain the operation of government. Simple right? It would have been if partisan ideology had not interfered with the process.
The Tea Party Caucus put their foot down and said they would not support raising the debt ceiling without cuts in federal spending. The President acquiesced, but with a caveat that revenues needed to be increased by eliminating tax cuts and loopholes. That is when the political game of chicken began and now has put the financial stability of the United States in unnecessary peril.
I agree on these points: Social Security, Medicare and Medicaid, as we know it, needs to be reformed to stabilize costs and viability; overall government spending needs to be reduced; Tax cuts and loopholes need to be removed and the whole Federal Tax Code needs to be revised; the debt ceiling needs to be raised for two years. The only one that can be accomplished in the next five days is raising the debt ceiling.
A fractured Congress cannot pull off the miracle of miracles and address all of these issues in the time allotted. Quickly drafted legislation offered by both sides have proven that they do not have the time to get all of the numbers right in a massive budget package.
It is time to prioritize. The main priority right now is to raise the debt ceiling. The US Congress has to do it, based on their constitutional obligation. The 14th Amendment does not give the President the authority to by-pass them and raise the debt ceiling by Executive Order. The Speaker of the House and The Majority Leader of the Senate must act now to avoid putting the nation they claim to love, and pledge their allegiance to, in further financial distress.
It has been a spirited debate and a great exercise in partisan muscle flexing. Now it is time to do the patriotic thing and raise the roof, so that the full faith and credit of the United States of America will still stand as the strongest line of credit the world has ever seen. There is no other option.