The Pros and Cons of Debt Ceiling on Economy

It increases the debt ceiling enough so that this all-consuming debate does not completely resurface for a significant amount of time (until after 2012 elections). This lends some much-needed stability to the circus that is Wall Street. It also frees up the political arena for a discussion of more meaningful issues, like jobs. Congress has been neglecting our stagnating economy and its bleak recovery for months, instead captivated by the spell of these circuitous negotiations. Just how bad is the economy? The unemployment rate is 9.2%. According to the latest report, manufacturing growth fell to its lowest in years. All increases in the GDP since the recession began have been pocketed by the wealthiest in America: the owners. The middle and working classes continue to struggle financially, and the amount of wealth owned by employees is plummeting when expressed as a percentage of the total economy. Meanwhile, the gap between the median household wealth of whites and minorities is expanding. White families own goods and savings that are worth (on average) 18 times the possessions of Hispanic households and 20 times the possessions of black households. That's a disparity that needs to change, and one that is sadly neglected by decision-makers in Washington.

Second, the bill cuts big chunks of fat out of the bloated defense budget. Our military industrial complex spends so much that it dwarfs the defense spending of the next dozen nations combined. The bill could lead to approximately $1 trillion in Pentagon cuts spread over a decade, which represent an annual trimming of 15% from the base budget. The only downside is that many of these cuts are relatively uncertain.

http://www.politicalmusingsfrommonterey.com/2011/08/more-pros-than-cons-in-debt-ceiling.html

Several recent polls have shown that the American people appear to be significantly opposed to raising the debt ceiling.

A recent NBC/Wall Street Journal Poll showed that people opposed raising the debt ceiling, even after being given pros and cons of it, by a 62 to 32% margin. Quinnipiac showed in February that on the question of whether failing to raise the debt ceiling was a good or bad thing, people were evenly split, with 46% saying it would be a good thing and 44% saying it would be bad. Ipsos/Reuters did a poll where people opposed raising the debt ceiling 71% to 17%.

These are numbers which very few policy positions get. It's in the range where even many Democrats must oppose raising the debt ceiling. But why is that?

The first problem might be a misunderstanding of what the debt ceiling is. I'm just conjecturing here, but the term "debt ceiling" isn't exactly clear, and in a time when people are increasingly concerned about the deficit, it is also scary sounding. It could sound like permission to increase our yearly deficit even more beyond the $1.5 trillion it already is. If that's what people think it means, then one could clearly see why people would oppose it, even many Democrats.

Other people might not understand what it is there for - that, even though Congress has appropriated money, the treasury still can't borrow more than Congress allows it to do. If the credit limit Congress has set on itself is less than the amount of deficit spending Congress has authorized, then we'll bump into the ceiling.

Others, again, may just have this nebulous thing about how debt is "bad" and therefore, of course we shouldn't have more of it.

The second problem is that people just aren't aware of the consequences of failing to raise the debt ceiling. The consequences are so dire than even people like John Boehner and Paul Ryan have said that there is no question we must raise it.

Some recent poll questions have tried to solve this problem, but frankly, have largely been lacking in their explanations.

http://www.bluewavenews.com/2011/04/why-are-people-opposed-to-raising-debt.html