Congress and President Obama have yet to reach an agreement to raise the nation’s debt ceiling, a necessity to ensure that the United States is able to meet its financial obligations. William Dickens, a Distinguished Professor of Economics and Social Policy at Northeastern, said that the U.S. economy could slide into depression if a deal is not agreed upon by the Aug. 2 deadline.
Why does the nation need to raise the debt ceiling, and what are the consequences that could be expected if a deal is not in place by the Aug. 2 deadline?
The US government is committed to pay out nearly a trillion dollars more over the next year than expected revenues will pay for. If we don’t raise the debt ceiling, and no way can be found around it, there will be large deep cuts. These will be felt both by the people who rely on the services that suddenly won’t be there and by the country as a whole as the money that doesn’t get spent reduces demand for the work done by other people and causes higher unemployment.
What should be a larger priority for the nation: addressing the budget deficit or dealing with unemployment and an economic recovery from the recession?
We have two problems. One is urgent and the other is not. The urgent problem is unemployment and the only thing we can do right now to reduce unemployment is for the government to make more of an effort to create jobs. That means worsening the other problem which is the long term sustainability of our federal deficit. But that is really not urgent ande is a problem that would be easily fixed if the people in congress weren’t so polarized over how to do it. Restore the Bush tax cuts, make a few adjustments to the pay out for social security, and cap medicare payments and agree on a way to administer the program if it comes up short, or increase taxes for medicare to the point where it pays for itself.
Why are political leaders unable to reach a deal on raising the nation’s debt ceiling?
This is totally unprecedented. The Republicans are trying to force their will for much smaller government and the elimination or severe cutbacks of very large parts of entitlement programs like Social Security and Medicaid by holding the country hostage. Despite that, President Obama has offered a set of budget cuts to meet the demands of the Republicans, and the Republicans have repeatedly refused because the president wants to pair them with revenue enhancements. But they say we cannot do anything to increase government revenues, even though anyone who has taken a serious look at the budget deficit knows that we cannot close that gap purely with spending cuts without eliminating very popular programs that even most Republican voters support.