The House of Representatives is going to force a showdown on the debt ceiling. For anyone in the GOP base, this seems like a good thing. Let me explain to you why it is not. First, the US Moody’s rating: We are a triple A rated country; in micro terms, that is to say if the USA was a person then the USA would have an 850 credit rating in all three credit bureaus.
Why does this matter?
If the debt ceiling is not raised the USA as a nation cannot pay our collective bills, so we will default. If that happens, Moody’s will lower the USA credit rating to double A. Now you may think, so what wrong with that?
If our rating is dropped, our interest rate goes up and this makes our debt worse. In addition, something else happens. China (which has a double A rating) wants to change the global standard form the dollar to the Yuan. They now have the advantage to do that since they have a higher GDP and better economic outlook then the US and the same credit rating.
Nevertheless, you may hear screaming that this debt, these loans, it all too much, we in the US spend too much! To be honest, no we are not spending enough. In the US capitalist economic ecosystem we have two engines that drive the economy forward. One is the private sector — all the business, all the sales, the different exchanges, all of that. The second engine is the public sector– the Government, state, local and federal along with all the contracts and employees that are needed to fill those contracts.
When the Great Depression hit we got out of it by having the second engine kick into high gear (the war effort and the infrastructure plans of FDR). When the second engine is stifled as Japan did in the 1990s, you get a second recession, or what is referred to in Japan as The Lost Decade.
There are some who argue that too much capital and not enough spending is to blame and adding to the money is not going to help. I say to them, look at the policies not of the finance minster but of the Japanese Parliament, they tried to pay down their debt and ended up putting Japan in a bigger hole than they were in to begin with. All of the armchair economists on Fox say that is not right. They say the debt is too high, there is not enough money to pay for everything and we cannot tax the rich because they make the jobs and…
Stop right there. First, stop watching Fox News because it is messing with your mind. Second, yes we will need to raise taxes on everyone in the country, back to the Clinton era tax levels. Third, we need to stop all corporate welfare. Finally, we need to close all the loopholes in the tax code and have everyone pay their far share, 68% of low income families did not pay taxes and that needs to change. If 68% of those families paid 10 dollars in taxes that would add up to billions of dollars. In addition, if every corporation paid their taxes instead of playing hide the money, we could pay down our debt and still spend our way out of our economic crisis.
The solution to the crisis is to stop worrying about the debt and start loving capitalism. If the GOP refuses to raise the debt ceiling because they’re playing footsies with the Tea Party, we will soon usher in US’s own lost decade.