Stark realities of U.S. life without credit
Reuters 14 Jul, 2011 13:49 EDT
Amid the political fingerpointing over which party will catch the blame if Congress fails to raise the $14.3 trillion debt limit, comes the stark reality of what bills get paid after Aug. 2, if the U.S. government can’t borrow more money.
A group of House Republicans wrote a letter to President Barack Obama on Thursday to say there would be plenty of money from tax receipts to make interest payments to creditors, pay Social Security retirement benefits, cover Medicare health payments and pay U.S. military troops.
Senate Democrats at a news conference made clear that once those bills were paid, little would be left for anything else.
“It would require the Treasury to make some very dark and difficult choices,” said Senator Charles Schumer, a member of the Senate Democratic leadership.
The U.S. monthly revenue totals $172 billion, while its monthly obligations total $307 billion. Payments for Social Security, Medicare and Medicaid, interest on the debt, troops and defense needs will gobble up the entire monthly income.
There would be no money for student loans just as young people are heading back to school, no money for the Federal Bureau of Investigation, border security, health research, food inspections, Schumer said.
“You don’t have anyone at the border, anyone doing food inspections, anyone in the FAA (air traffic control) towers. America would come to a grinding halt,” Schumer said.
On top of that, global financial markets would punish the United States and interest rates would rise throughout the economy.
Democrats are betting that the stark reality of failing to raise the debt limit will push congressional Republicans toward compromise on a roughly $4 trillion deficit reduction package that has both spending cuts and tax increases. Such a package would help clear the way for Congress to raise the credit limit. But Republicans want only spending cuts and no tax increases.
Democrats argue that a balanced approach is needed to prevent steeper cuts to Medicare and Medicaid health programs and Social Security.
A new poll by Quinnipiac University found that the public might be more likely to blame Republicans if a deal is not reached. Also, 67 percent agree that the deficit package should include tax hikes for the wealthy and big corporations as well as spending cuts.
Photo Credit: Reuters/Mike Segar (The Wall Street Bull sculpture in lower Manhattan)