As the world watches with disbelief at the political gamesmanship and name-calling emanating from Washington, Aug. 2 looms menacingly, as the tipping point when we rupture what once was intended to be -- but no longer is -- a safely-out-of-reach debt ceiling. Many see this as the modern-day equivalent of the biblically-prophesied Armageddon. But, despite the critical need to resolve our current budget/spending impasse, it will happen, either immediately before, or shortly after, Aug. 2.
Despite the ongoing budget crisis, the U.S. is a great nation by any measure, evidencing exceptional creativity in many areas, including science, quality-of-life, and industrial prowess, to name just a few areas of our continued excellence.
We have circled every planet in the solar system with space shuttles and satellites, with the Hubble telescope providing the clearest pictures of the universe the world has ever seen;
The advancement of small and lightweight research and entertainment resources -- notably Apple’s iPhone and iPad -- have put infinite facts and clever entertainment options at our everyday disposal; and
It required 20 European Union states to match Boeing’s prowess and ability to transport large numbers of people over extensive global distances with greater fuel-efficiency and fewer aircraft, while Lockheed Martin makes the most advanced weapons, tanks and aircraft carriers in the world.
This trend of innovation and creativity will continue, and our debt ceiling will be realigned with greater prudence in government spending and entitlements, because inaction and inertia are simply not an option. The potential consequences of making it prohibitively expensive for the U.S. and U.S. corporations to borrow money, or an even more devastating decline in the value of the U.S. dollar, are simply not acceptable results.
While raising the debt ceiling has taken prominence recently, it’s not an unusual occurrence. Congress has raised the debt ceiling 72 times since 1962, including 10 separate times in the past decade. When President Obama took office in 2009, the U.S public debt was $10.6 trillion; today, just three years later, the debt limit is in excess of $14 trillion. And, a 1979 rule allowed the House of Representatives automatically to raise the debt ceiling to whatever level was required. In January 2011, however, the House repealed this rule, and now a separate vote is required to increase the debt limit.
The claim of Treasury Secretary Geithner -- that the debt ceiling must be raised by Aug. 2 to avoid defaulting on the government's financial obligations for the first time in U.S. history -- is not literally correct, however. There is a great deal of discretion residing with the administration to structure payments, reduce spending levels, and moderate government entitlements, without causing us to default on our outstanding obligations. Those who refuse to reach an acceptable compromise, and who put the credit rating of this country at risk, however, will surely incur the wrath of those who vote, not to mention those who have loaned this country funds. That would be political suicide. This means the question isn’t whether a compromise will be reached, but rather when, and on what terms, a compromise will come into being.
The final negotiations will almost certainly take place behind closed doors, as they usually do. Public finger-pointing and chastising rhetoric have long been unfortunate staples of our political process. The ability and resolve of the U.S. to pay its bills is not in question, however, and the logistics of raising our current debt ceiling should not cast doubt on the U.S.’ status as a world leader of strong financial will and innovation. As Edward Young remarked in 1742, “procrastination is the thief of time.” The longer Congress and the president procrastinate, the greater the likelihood that their procrastination will steal a great deal more than simply time.
Harvey Pitt is a former chairman of the SEC and now runs his own consulting firm, Kalorama Partners, in Washington, D.C.