Dear Commons Community,
Paul Krugman in his NY Times column yesterday, reviewed the current debate/stalemate on lifting the debt limit in Washington that has permeated the news media in recent weeks. Dr. Krugman established that if nothing is done, the federal government will hit its legal debt limit. As a result, at best, we’ll suffer an economic slowdown; at worst we’ll plunge back into the depths of the 2008-9 financial crisis. In the past, raising the debt limit was a routine congressional action and never debated. It was raised seven times during George W. Bush’s administration without any fanfare.
Dr. Krugman expanded on the repercussions as follows:
“Failure to raise the debt limit — which would, among other things, disrupt payments on existing debt — could convince investors that the United States is no longer a serious, responsible country, with nasty consequences. Furthermore, nobody knows what a U.S. default would do to the world financial system, which is built on the presumption that U.S. government debt is the ultimate safe asset.
But confidence isn’t the only thing at stake. Failure to raise the debt limit would also force the U.S. government to make drastic, immediate spending cuts, on a scale that would dwarf the austerity currently being imposed on Greece.”
Dr. Krugman comments that President Obama was almost naïve in not securing the raising of the debt limit as part of the budget agreement reached last December when the Bush tax cuts were extended. However, he reserved his most important comments for the Republicans who he believes feel that President Obama will “cave in to their demands for budget cuts and no tax increases”. Furthermore, he states that “ it’s hard to avoid the suspicion that G.O.P. leaders actually want the economy to perform badly” to bolster their elections chances next year.
His conclusion: “It’s time — indeed, long past time — for President Obama to seize the issue and to prove them [the Republicans] wrong.
Yes, Mr. President!