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Editorial: Raise the debt ceiling now

BY DI EDITORIAL BOARD | OCTOBER 14, 2013 5:00 AM

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The country is still reeling from the recent partisan showdown that resulted in the U.S. government shutdown, but another congressional stalemate has reared its ugly head: the impasse over the debt ceiling.

The battle lines are drawn on predictable grounds. Republicans, similar to their position in the last budget standoff, hope to use the debt-ceiling deadline as a time to make a stand on debt and deficit reduction and normally would vote against raising the limit. Democrats, normally, would fight for a larger increase in the debt ceiling.

However, this time around, the circumstances have changed. With nonessential government services on pause, public patience and confidence is reaching new lows. The public hopes Congress will be able to avoid a default, but the lack of compromise on the shutdown, which has now gone on for two weeks and counting, gives reason to fear that a default is coming.

Though both sides have played political games with the government shutdown, the time has run out for maneuvering on the spending limit, and recent offers by members of Congress have reflected that. On Oct. 10, House Speaker John Boehner offered support for a temporary deal that would increase the debt limit until late November, with the condition that the president negotiate on the budget.

The offer, however, was rejected by the White House, because it did not address reopening the government.

On Sunday, efforts to reach a deal on both the government shutdown and the debt ceiling before financial markets opened didn’t bear fruit. And with the Treasury running out of options, Treasury Secretary Jack Lew has told Congress a default will likely occur Thursday.

Recent events show that fears on the debt ceiling are well-founded. In 2011, even the threat of a default on the debt caused the DOW to drop 2,000 points between late July and October, among other stock-market tremors. It also led to the country’s first-ever credit rating downgrade.

The country, to this point, has never actually defaulted on its debt obligations. The U.S. Treasury has frequently used “extraordinary measures” to avoid economic damage once the debt limit has been breached, but such measures will soon run out. It is generally accepted that the resulting default would cause another economic plunge into recession.

The United States simply cannot afford the economic costs of another prolonged debt ceiling fight, let alone an actual default. Politics aside, a deal needs to be reached in order to give the country some fiscal breathing room and set markets at ease. The debt ceiling must be increased, at the very least temporarily.

Not only does raising the debt ceiling make sense from an economic perspective, but delaying its increase costs more money. The Bipartisan Policy Center found that the delay in raising the debt ceiling in 2011 will cost the government $18.9 billion over 10 years in increased borrowing costs. If those against increased government spending truly want lower budgets, avoiding unnecessary expenses such as these are a good place to start.

Concerns about the ever-rising debt of the United States are valid, and Congress should address these issues with the president as part of a later deal. But the country is staring down the barrel of an economic crisis, and inaction on the debt ceiling would be equivalent to pulling the trigger.


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