News Columns & Blogs

Pro-con: Was Congress right to raise debt ceiling?

The nonpartisan Congressional Budget Office forecasts unemployment of 10, 9.1 and 7.2 percent, respectively, for 2010-12. That means millions of ruined lives and permanent scars that will persist for years and possibly decades — in the form of increased poverty, lower educational levels, mental illness, suicide, crime and other social ills. The stimulus is estimated as having saved 1.6 million to 2 million jobs, whereas we are down about 8.5 million jobs since the recession began. Bottom line: We need more stimulus, not less. This is not the time to be worrying about deficits or national debt. It is clear that there is no short-term problem with running large deficits in a weak economy: Investors are buying up even long-term U.S. Treasury bonds at remarkably low real interest rates. Clearly, the markets do not perceive that our government is heading into risky territory with its debt. Interest payments on the debt are currently just 1.4 percent of gross domestic product. — Mark Weisbrot, Center for Economic and Policy Research

Every time Congress sets a new debt limit, the government quickly reaches it and Congress responds by raising the limit again. The surge in debt financing will make it more difficult for the economy to improve, as more tax dollars go to finance interest payments, leaving fewer dollars for other needs. A second storm cloud is the aging of the baby boom generation: Americans born between 1946 and 1964. The first baby boomers already have started collecting Social Security and will become eligible for Medicare next year. If the government borrows money to pay these long-promised benefits, as seems likely, federal debt could skyrocket. A third challenge is the growing reluctance of foreigners — notably China — to finance the deficits by acquiring ever-more Treasury securities. The solution to such tensions is painfully obvious: control spending and stop running massive deficits. But as we saw as Congress voted to raise the debt limit once again, that obvious solution is politically beyond Washington's grasp. — R.D. Norton, American Institute for Economic Research

  Comments