What the Debt Ceiling Means Politically
The request for debt ceiling increase by the Democrats is for the amount of money they need to keep the party going until the 2012 elections. Then the hangover would be on the Republicans’ watch, if they won in 2012.
But the spending problem of the last half of Obama’s term is a continuation of the spending problem of the first half of his term. In fair part that’s what created the current crisis, the first half.
It would be nice to have a fair amount of the pain of these economic readjustments start right away.
The clock that is ticking is the interest rate. It cannot be allowed to move substantially upwards because it would require most of the 1040 income streams to pay it, if it was 6-8%. But the past printing of money by Bernanke is going to cause the interest rate to go up. The time frame is unknown, but let’s say that it could be somewhat before, or somewhat after the 2012 elections.
This is a “double-whammy” – and it’s right around the corner. If the interest rate goes up, the US Government needs debt ceiling increases just to pay the interest.
The window of time is quite short for the required actions, and thus the entire end game of this issue will be based on the decisions made now in the Congress.
Try to influence your Congressmen to not give an inch on the debt ceiling increase. The Democrats and the Washington entrenched interest cannot be trusted to provide offsetting budget cuts.