Preview of Coming Distractions

Whew! Looks like we dodged a bullet when Congress kicked the can down the road a few more months, eh? Of course, these are two handy metaphors for what is ultimately an irresponsible failure of government. So what do we have to look forward to when our nation hits the same wall again early next year?

First, let’s define the situation. The Congressional Budget Office estimates the U.S. made $223 billion in interest payments last year. To avoid an actual default, we will be on the hook for at least that much by the end of this new fiscal year. Additionally, some portion of our debt will mature, requiring additional cash to repay the loaners unless they are willing to roll it over and let it ride. Also, there will be a continuing drain as we meet a wide variety of continuous expenses such as military pay, social security benefits, and Medicare. All of this is in addition to paying the bills for goods and services our government procures on a daily basis.

Offsetting all of this, of course, is the income brought in from taxes, tariffs, and so forth. Obviously there isn’t enough to go around or we wouldn’t see the deficit continue to grow. Some believe the U.S. can continue to go further in debt for some time yet; others feel spending must be brought under control and every day’s delay in doing so will aggravate the problem even more. This issue was a significant part of the debt ceiling debate just ended, and the one set to soon begin anew.

Why did the promised (and decried) ultimate showdown seeking resolution of this issue get delay yet again? Many economists feared an actual default would result in a financial crisis far worse than that sparked by the Lehman failure. True or false, the extension was made. It comes just in time for the holidays. Rather than stick to their purported principles, did everyone in Congress realize the hit their constituency would take if America’s seasonal shopping binge was cut short by wide-spread pay cuts and how this might affect their chances for reelection? (by J R)