Raising the National Debt Ceiling

Senator Mitch McConnell has been in the US Senate since 1984. He has been on numerous Congressional committees and sub-committees including appropriations committees. Perhaps that's why I was so stunned at his statement about the effects of not raising the US debt ceiling.

In 2008, Obama presented an idealism to the US public: Universal Health Care. Recently Senator McConnell followed Obama's footsteps and presented an untrue statement to Jim Lehrer on the PBS News Hour. He stated that lowering the national debt was more important than raising the national debt ceiling. He acted as if not raising the debt ceiling would have no consequences.

Before the reader gets angry enough to stop reading this article, I'll present a easily understood oversimplified explanation.

If the debt ceiling is not raised, the US default on it's debt interest payment. Let's assume you have a profitable investment in a firm. You were sent a letter stating that you will receive a dividend of $100 dollars on June 1st. June 1st comes and goes and you do not receive the dividend. The firm defaulted on it's dividend payment.

Consequently, you would consider any future investment in that firm a high risk. Now what does one demand if one is considering making a high risk investment? High interest rates. The higher the risk, the higher the interest payment. Furthermore, you might seriously consider cashing in on your current investment.

Now apply this simple principle to the national debt. Defaulting on our national debt interest payment will result in higher interest rates and consequently an urgent crisis. In addition, it would affect the value of the US dollar.

One expert on the Washington Journal on C-SPAN gave his assessment of our national debt. He stated that 1/3 of the debt was created via Federal spending, 1/3 was created via tax cuts and 1/3 was created via the recession. If we cut taxes 10% and increase spending 10%, the debt will rise by the sum of the two or 20%. This is true primarily because tax cuts have not resulted in a stronger economy.

Personally, I think Senator McConnell consciously presented a falsehood in an effort to fool the public. I think the raising the debt ceiling is critical and urgent. I think defaulting on our national debt interest payment would have disastrous consequences.