Americans at the Limits of Debt

Years of inter-party contradictions, unjustified wars and programs without financial support have resulted in Americans arriving at the legal limit established for public debt and have raised fears of a recession.

The Department of the Treasury’s forecast says that on May 16 the country will reach its allowed $14.3 billion debt ceiling, equivalent to every American owing $47,000.

U.S. Treasury Secretary Timothy Geithner expressed his hope that Congress will raise the debt ceiling to avoid a cessation of payments.

Geithner said that lawmakers must avoid negatively affecting national credibility, which a cessation of payments would do.

He said that he is confident that Congress will raise the debt ceiling.

If the ceiling is not raised the administration could not borrow and would stop making debt payments, but Republicans are opposed to raising the debt ceiling until the government accepts their plan for spending cuts.

Some critics consider the scenario of fiscal ruin to have been set by former President George W. Bush in his two terms in office, during which the Republicans supported ideas that they are now opposing.

Bush favored big tax cuts for the rich, promoted wars in Afghanistan and Iraq that bled the taxpayer’s wallet and devised a program to provide drugs to the elderly that lacked sufficient funding.

In recent years, public debt has grown exorbitantly; the margin of increase is astonishing. In 1981, roughly 200 years after the country’s founding, it was just under $1 trillion.

Many ask what happened in the last 30 years and where more than $14 trillion went.

Congress — where both parties understand that the government could be forced to default on its obligations — must face up to the situation. Even the U.S. Treasury warns of implications that lead to non-payment of interest on bonds and other situations that can lead to a recession.

The Republicans use the issue to attack President Barack Obama, ignoring the leading role played by past governments of their political affiliation in raising public debt.

This week Obama will deliver his response in Virginia, in Palo Alto, California and in Reno, Nevada, according to the executive agenda, as part of an effort to promote his new deficit reduction plan, comparing it to that of the Republicans.

The president must insist on restoring fiscal responsibility and on the necessity that Congress raise the country’s debt ceiling. And one hopes that he will not neglect to charge Bush with squandering the budget surplus that he was handed when his predecessor, Bill Clinton, left office.

During the past week, the president commented that the country had gone off on the wrong track during the Bush years, and he gave his assessment of how to resolve the crisis in the long-term, which, according to him, would allow Congress to raise the debt ceiling.

Economic experts believe that despite the inter-party recriminations, the causes of public debt can be found in the recession from 2007 to 2009, which forced the White House to spend hundreds of billions of dollars to save the economy.

This was aggravated by the wars, and the same crisis affected the pockets of individuals and companies, therefore reducing tax revenues.

In the short- and medium-term there will be a retirement boom in the United States that will further complicate the situation by placing great demands on Social Security and health care for millions of people.

The situation today is equally complicated for Democrats and Republicans because the need to set mandatory limits for future spending is evident, political commentators believe.

On the other hand, if the debt ceiling is not increased, there could be a debt moratorium — something that has never happened in the United States.

This would have devastating effects on a country whose bonds are considered among the safest investments in the world.

Currently, millions of Americans, along with governments and foreign investors, have large investments in Treasury securities, and this can act as an element of pressure to increase the public debt ceiling.