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Raising the National Debt Ceiling in FY 2011, Fiscal & Economic Suicide

January 4, 2011

Ever since the 1960’s congress has periodically voted to increase the national debt ceiling. A cursory analysis may make this seem like historic pattern of overspending; however if we remember that debt to gdp ratios consist of the real measure of a country’s debt burden, it makes sense that as GDP rises so too do national borrowing needs. Now it seems that a republican controlled house is threatening not raise the debt ceiling in FY 2011, thus discontinuing what has been a routine practice for the last 40 years (e.g. during Bush Junior’s presidency it was raised 9 times). While supporters of discontinuing the policy say it will force congress to balance the budget, they fail to note that by most estimates the U.S. will hit the debt ceiling by March. This means that any potential spending cuts wouldn’t even have time to take effect prior to when it would be necessary to raise the debt ceiling.

Analysis

Basically the politicians who support this proposal are bluffing to get policy concessions that they want (namely undermining social security and medicare by decreasing benefits). The proposal to not raise the debt ceiling is insanity. It would demolish the global economy, thoroughly.

This is not an effective way to conduct national policy. Tough decisions about the deficit and budget need to be made on both sides of the isle, but they should not be made through concessions to policy makers threatening economic suicide.

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