The debate over the national debt is heating up and will soon come to a head. The US reached the statutory limit for borrowing on May 16th, 2011. There is a limited amount of time the US can use cash on hand until a estimated date in August. The issue is being brought to the forefront as ratings agencies such as Moodys have issued warnings about the possibility of a US debt crises and increased risk of default. The net result will be dramatically higher interest rates on top of trillions of dollars in debt. At this rate the US will be unable to make payments and will have to default on the debt.
This would be a national disaster of unequaled parallels. Essentially the dollar would plunge in value if it even was to survive. The economy as we know it would cease to exist. It would be a crises unequaled in American but not world history. History is full of examples of this occurring and results are not pretty in every case.
My question then becomes how does the Democratic Party politically benefit from risking destroying the foundation of the US economy?
The rallying cry of the Democrats is a appeal of the dangers of restricting Medicare. This is the on every news show and appears as a programmed talking point. My objection to this is the fact Democrats gutted Medicaid in a nearly forgotten bill called “Patient Protection and Affordable Care Act” or popularly known as “Obamacare”. Call it what you want the end result are a Federal and State Governments suddenly subsidizing previously uninsured patients at a cost estimated in the hundreds of billions of dollars adding to the national debt. Add in the stimulus and reduced Federal Tax Revenues and the situation is critical.
What does publically blaming Republicans for this do to reduce the national debt? The Democrats offer no solutions as a alternative. The only solution floated is the generic Democratic solution to raise taxes and even if tax rates were dramatically raised it would still not cover reducing the debt. No numbers are ever offered to support this and it appears a standard talking point without supporting evidence.
The Democrats never even completed a budget for two years. And now they are going to protest fiscal responsibility?
Surely the Democrats know the risks. There are two possible explanations.
The first is that the Democrats sincerely believe the US Government is too big to fail. This of course is not supported by history and experience. Many governments have fallen due to financial mismanagement. This course has a price of a reduced dollar purchasing power and dramatically higher interest rates. Both of these were present in the late 1970’s with similar policies under President Jimmy Carter. The effects on the US economy and the Democratic Party for the next 8 years were disastrous.
The second is the Democrats want the US economy to collapse. This is in the belief somehow they would consolidate or increase their political power. There are several theories such as the Cloward-Pivin Strategy and various far leftists calling for this and the destruction of Capitalism believing this would improve the world. How this appears to benefit the nation I have no clue.
My advice to Democrats is that refusing to reduce spending and causing a severe inflationary spiral will have exactly the opposite effect than desired. The American people in the event of a crash will not be blaming Republicans but Democrats. From looking at the late 1970’s Democrats took at least 12 years to recover from the memories of President Jimmy Carter and his policies.
Democrats have the control of the Presidency and the Senate. The debt must be dealt with now either by voluntarily reducing spending or having outside agencies reduce the ability of the US to borrow though ratings downgrades and resulting interest rate hikes.
The ball is in President Obama’s court. The decision is his to make. The future of America will depend upon it. But the consequences will be his as well. The time to choose is now.