Tuesday, August 2, 2011

Will The U.S. Ever Default On Its Debt?

Had Democratic and Republican members of Congress not voted to approve a deal to raise the debt ceiling on Monday, today may have been a reprise of Black Tuesday. But they did, and it won't. For now.

Neither side got what they fully wanted, but the deal was a compromise between President Barack Obama and leading Congressional Republicans in a day and age where the word bipartisan has become a sign of weakness. In sum, it will allow the United States to borrow up to $2.1 trillion and cut $2.4 trillion in federal spending over the next decade. Notable additions include that of a new twelve member committee to recommend further spending cuts and a proposed amendment that would require the federal government to have a balanced budget, a lack of which has raised this country's debt ceiling time and time again.

For those of you reading this who didn't know or didn't care about the consequences of the United States defaulting on its debt at this time, here's the sobering truth. Those dependent on federal aid, specifically the elderly, disabled, and armed forces, would have had to wait weeks, even months, for compensation. Federal employees and contractors would have their paychecks suspended, as well. Interest rates on mortgages, loans, and credit cards would've skyrocketed. Stock markets, both in this country and the world over, would take a nosedive. Take all that, combined with the fact that the U.S. economy is moving upward at a snail's pace of 1.3% right now, and this country's financial reputation would've been permanently tarnished.

But most Americans aren't upset that a debt deal was passed. Its the political grudge matches that have got them fired up.

The past several days have played out like some daytime soap opera. Speaker of the House of Representatives John Boehner, a Republican, and Senate majority leader Harry Reid, a Democrat, each introduced their own deal, only for both propositions to be swiftly defeated by the opposing party in the majority of each body of legislature. (Verbose, I know.) On the night a debt deal was agreed upon, President Obama remarked it had "taken far too long." Understandbly, waiting until the day of the deadline adds drama and makes for great media fodder, but with this country's economic future on the line, it's not the time nor the place to play these silly games.

And word on the Web is that this deal may ultimately do more harm than good, including a potential downgrade for the U.S.'s remarkably pristine credit rating and a good chunk of spending cuts to take away from Medicare, Medicaid, and Social Security, programs that directly affect millions of senior citizens and millions more who'll hit a certain age.

It seems the only good news, as I've mentioned earlier, was that a debt deal was passed, and the United States avoided a government default for the first time in its history.

As far as history is concerned, the past thirty years, especially, have been peppered with talks on the dangers of defaulting and the importance of reducing the deficit, from Reagan to Obama. And every time, this country has come closer to going too far.

If there is a silver lining to be found in this dark cloud hovering over the United States, its that for every valley, there's a peak to be followed. The problem is in finding out how deep that valley really is, and whether this country is on the upswing.

Because it seems that with every passing year, politicians in Washington, D.C. spend more time talking about strategies to trim the debt than actually doing so. Maybe all those perks they get for being in Congress distracts them from doing their job.

But seriously, the greater underlying issue here is that if the job market doesn't recover real soon, if certain people don't start paying more of their dues (i.e., the upper 2%), and if government spending isn't properly managed, the United States of America will fail. There's no way around that. The riches of the few cannot overcome the plight of the middle- and low-class populations struggling to live in the most prosperous nation in the world. Today, the U.S. dodged a big bullet. But I fear the revolver we're staring down has got more ammunition than we do solutions to turn this country around.

God hope I'm wrong.

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