Protect Uncle Sam’s top-tier credit rating
Published: Wednesday, June 8, 2011
Updated: Wednesday, June 8, 2011 16:06
The battle over raising the federal debt ceiling, which is the limit upon the federal government's ability to borrow, has taken another turn.
Moody's Investors Service, a credit rating agency, announced last Thursday that it is considering lowering the federal government's credit rating. This comes on the heels of a May 31 vote in which House Republicans voted down their own proposal to raise the debt limit, and were joined in that vote by many Democrats.
The federal government needs to act now to avoid this downgrade because it can create significant problems. As it stands right now, the federal government holds an AAA rating. This is a top-tier rating that identifies America as one of the world's safest investments. This has allowed the government to borrow funds at phenomenally cheap rates to continue to fund itself.
The principle is much the same as if you or I had a credit card and didn't pay our bills. Banks would no doubt increase our interest rates, which would hurt our pocketbooks. The effect will be the same for our government. A downgrade in our credit rating could potentially mean increased interest rates on the money that the government is borrowing. That's going to put the federal government in an even deeper hole, and force us to make even more difficult choices than the ones that we currently face.
This isn't some abstract problem that we can sit back and expect Washington to fix; they aren't fixing it. Instead, they are playing political games that are not going to lead us anywhere. The Republican vote against the party's own proposal to raise this limit was a classic example of this. With 47 percent of Americans against raising the debt ceiling, and 34 percent not having enough information to take a position, according to Gallup, this tactic was great politics.
The central argument that republicans have made against raising the debt ceiling is that any effort to do this must be accompanied by significant spending cuts. Both the president and Republican lawmakers agree that the annual budget deficits need to come down. Republicans insist on cutting spending without raising taxes, and Democrats are insisting that any plan to reduce the deficit must include both, according to the Salt Lake Tribune.
Time is running out on avoiding a government default. The government hit its borrowing limit on May 16, and Treasury Secretary Timothy Geithner is essentially playing accounting games in order to keep paying the bills. However, Geithner has said that he will not be able to maneuver anymore after Aug. 2. The government will default, and if this happens, we could lose our top-notch credit rating; not to mention it would hurt the people that depend on the government's ability to pay its bills, such as military families.
We need to act now to preserve our creditworthiness and pay our bills by raising this ceiling. There will be plenty of time going forward to fight about spending cuts, but we must ensure financial stability in our government. Neither political party is well served by having our nation's debt continue to grow. This warning from Moody's should serve as another red flag, indicating that we need to act now to ensure financial stability for the government and its employees.