FACEOFF: Has the U.S. debt crisis reached the point where it poses a major threat to the nation’s future?

What is the debt ceiling exactly? It's a cap set by Congress on the amount of debt the federal government can legally borrow. The cap applies to debt owed to the public (i.e., anyone who buys U.S. bonds) plus debt owed to federal government trust funds such as those for Social Security and Medicare. The first limit was set in 1917 and set at $11.5 billion.

How high is the debt limit right now? The ceiling is currently set at $14.294 trillion. The country's accrued debt hit that mark on the morning of May 16.

But by taking various extraordinary measures like suspending investments in federal retirement funds, U.S. Treasury Secretary Timothy Geithner will be able to bring total debt down enough to allow the government to continue borrowing until Aug. 2.

How many times has the ceiling been raised? Since March 1962, the debt ceiling has been raised 74 times.

What happens if Congress doesn't raise the debt ceiling before Aug. 2? No one knows for sure. But the going assumption is that no good can come of it. Treasury would not have authority to borrow any more money. And that can be a problem since the government borrows to make up the difference between what it spends and what it takes in. It uses that borrowed money to help fund operations and pay creditors.

That means Geithner will have to pick and choose who to pay and who to put off every day. He said it would be akin to a homeowner who pays his mortgage but puts off his car loan, credit cards, insurance premiums and utilities. The mortgage is taken care of, but the homeowner's credit could still be damaged.

Ultimately, if lawmakers fail to raise the ceiling this year, they will have two choices, both awful.

They could either cut spending or raise taxes by several hundred billion dollars just to get through Sept. 30, which is the end of the fiscal year. Or they could acknowledge that the country would be unable to pay what it owes in full and the United States could effectively default on some of its obligations.

The first option would be impossible to execute without serious economic repercussions. And the second option could cripple the economy and send world markets into a tailspin. (Source CNNMoney)

FACEOFF: Has the U.S. debt crisis reached the point where it poses a major threat to the nation’s future?

By Charlie Meyer:

 Yes, folks we have a national debt problem.  How we got there, and how we dig ourselves out of this hole is where Left and Right disagree.

It used to be that Congress effectively raised the debt ceiling practically every time they passed a bill with a price tag. Now that we address the debt ceiling on its’ own, there’s plenty of political drama to be had.  The prudent worry about the “full faith and credit” of the nation; before the bankers loan you money, they check whether you paid regularly for previous advances. Only the most Tea-crazed want to play “chicken” with the national economy to grandstand and stage a simpleton showdown.

Only early in one’s childhood does one ignore long term debt concepts, such as the mortgage your parents incurred to buy that house you lived in.  Tykes with their first allowances burning holes in little OshKosh pants pockets might figure that Mom and Dad just saved everything for a year to buy the house outright. Fat chance.  Later in life, we realized that kids and dogs like being fed on a regular basis, and get downright cranky when they miss a meal. We learned that some things require long-term borrowing, such as for that home or that car.  Cashing out on the inflated value of the house to go on a Club Med vacation is generally foolish and hazardous to one’s financial health.

Most of us, when faced with financial insolvency, try to sort out how to: (1) bring more money in, and (2) where we can safely cut expenses.  It takes both, unless one is so enamored with tax cuts that the richest nation on earth can thrive on less.  If our household bills mount to crisis levels, we usually don’t refuse a paycheck. Rather, we’d either make the risky request for a pay raise from the boss, or perhaps get a second job, while we watched expenses.

You just can’t cut your way to prosperity. The economic carnage of tax cuts for the rich certainly hasn’t struck up the band for a cheery rendition of “Happy Days Are Here Again” for the rest of us.

Terrorist Osama bin Laden is safely at the bottom of the ocean feeding the fish, courtesy of the United States Navy. I’m waiting for some business school wonk to use that late Saudi nogoodnik to illustrate how a rather small hijacking investment effectively leveraged one of the largest public expenditures in history for the world’s leading economy.  These massive outlays ultimately have to be paid for. 

Sorry, throwing Grandma under the bus by effectively snuffing Medicare for the profits of corporate health insurers isn’t scoring Brownie points with America’s seniors.  What’s next? Social Security being handed off to Wall Street?  Seventy-odd years ago, Repubs of that day fought President Roosevelt’s highly popular landmark safety net and, fortunately for generations of Americans, failed then. Ask George W. Bush how he squandered all that political capital like a bad night in Las Vegas when Dubya tried “privatizing” Social Security.  Republicans who want to keep enjoying those taxpayer paychecks in office should realize American seniors vote in great numbers. Bank on it.

By flaunting the handing off of Medicaid to the reactionary whims of “scorched earth” Republican governors and legislatures, state pols get to do the dirty work to deny basic health care for needy children and the most vulnerable.  Tough luck, Kiddo, the rich want tax cuts.

President Obama and Democrats in Congress have offered many often painful spending cuts to reduce the deficit without throwing Americans out with the bath water. The challenges are far from over, but bad old Republican obstructionist politics again rears its’ ugly head.

In last Sunday’s round of morning political talk shows, serial monogamist Newt Gingrich committed a very public act of Hari-Kari by labeling the G.O.P. Ryan fantasy “Path to Prosperity” budget scheme as “Right Wing Social Engineering.” As a liberal columnist, I had really hoped ole Newt would last more than a week as a declared Republican 2012 Presidential Primary candidate. Just as the late Jacques Cousteau used to demonstrate on TV long ago that a wounded shark turns a school of predators into a feeding frenzy bloodbath, the conservative long knives came out in earnest to make Calista Gingrich a political widow in the G.O.P. “big tent.”  I expected less venom from one of Newt’s jilted ex-wives.

Along with the early bow-outs of a handful of contenders, including egomaniac Donald Trump and huckster Mike Huckabee, the G.O.P. Coterie of Clowns shrinks before late night comedy writers exhausted their rich motherlode of source material. As usual, we can sadly count on the Republicans to talk jobs and prosperity on the campaign trail, and shift gears back to radical right-wing social engineering and corporate welfare once the voters have again been bamboozled. 

Wisconsin Rep. Paul Ryan (R) decided not to campaign for the Senate seat being vacated by retiring Sen. Herb Kohl (D) in 2012. After Wisconsin Gov. Scott Walker (R) and state G.O.P. legislators’ recent ham-handed war on teachers and other state employees, perhaps a spate of recall petitions might just make being a major candidate from the Party of Lincoln Navigator rather unpalatable. Cheeseheads in “America’s Dairyland” are still wondering where those jobs and promised prosperity are hiding.

Come on Republicans!  Election Day 2012 is still a long way off. Don’t quit now, recession-weary America needs the laughs! Seriously, America needs intelligent solutions, not reckless political grandstanding.

We need a long-term strategy to provide for America’s critical needs and sensible debt reduction, not dangerous daredevil stunts which imperil the “full faith and credit” of this nation.

Increase the debt limit.

By Stephen Smoot:

 The preeminence of the United States is under threat.  Our economic, political, and even military power face potentially steep decline over the next few decades unless we can contain and defeat this emergent threat.  As we have discussed so many times before, the threat is debt.

Everyone shares blame here.  Democrats share blame because they back the expansion of social programs without figuring out the wherewithal to pay.  Republicans share blame because we backed tax cuts without corresponding slashes in spending.  Every congressman who ever went to his colleagues and successfully obtained money for some sort of cowboy poetry festival or something equally irrelevant is to blame.  We here in West Virginia were the face of the problem for many years because we lauded Senator  Byrd’s vacuuming up of every spare federal dime possible.  We all share the blame because the political system we have is built to promote the easy way out.  Taxes must be cut to spur the economy, but every community wants their share of federal funds to increase.  It all must stop somewhere.

I would guess that up to this point, my esteemed liberal colleague and I are in full agreement.  We will probably disagree on the finer points, but any thinking, reasonable person can see that we have a crisis.  How to solve it is the question.  We must not only find a way to pay down the debt, but also change the structure so that this does not happen again.

Changing the structure will help bring resolution to the problem.  Every year, West Virginia and several other states must make tough choices because their constitutions require a balanced budget.  Sometimes they do some neat accounting tricks to make that happen, but they clearly cannot run up massive debts.  Our federal constitution needs the same limitation.  Don’t spend more money than you take in.  That’s pretty simple. However, this merely opens the door to possible massive tax increases.  The other side of this change is that we pass an amendment that mandates that no person or corporation may be charged more than 25% of their income in taxes in any given year.  That includes income, gasoline, etc.

So how do we get the budget balanced if we can only tax up to 25%?  Simple.  If we eliminated corporate subsidies and all tax breaks (except earned income credit) then the actual revenue might even increase.  The difference is that certain companies and economic sectors would no longer get unfair advantages and would have to operate in a more free market system.  Liberal congressmen can makes their constituencies happy by raising tax rates on big business, but still return a lot of that money back in breaks and subsidies.  Eliminating breaks and subsidies while putting a ceiling on the tax rate creates a more fair marketplace while bringing in more revenue.

Most importantly, as we have said before, Americans must rethink their expectations of government.  We almost need a revolutionary change of mindset.  In foreign affairs, we must remain pre-eminent, but we need not be dominant.  Relying on European members of NATO, India, and other friendly democracies to pick up some of the slack of keeping order in the world is a necessity.  Foreign actions are expensive.  Also, my layman’s mindset understands why we need some of our expensive weaponry in case we ever engage a power such as Iran or China.  But is it not possible to create a fleet of lower cost aircraft, for instance, to engage low level threats that pretty much only operate in two dimensions, such as the Somali pirates? We should get creative in defense expenditures and not only think that the most expensive is always the best.

 Domestically, we have got to reduce costs and, again, we have discussed these ideas before.  The Department of Education’s existence has not resulted in a better education for public schoolchildren.  In fact, its burdens on teachers may be driving away dome of the best and brightest from the field.  Just get rid of it.  The Department of Energy’s functions could be divided between Commerce and Defense.  In the future, new road and bridge construction should explore the possibility of private turnpikes and toll bridges.  We cannot afford to maintain our current system and finish what we have, much less roads still in the proposal stage.  In general, Americans need to come to grips with the fact that federal money just should not be used anymore for most local projects.  The standard should be, is this absolutely necessary for the safety of life and property?

Speaker of the House John Boehner’s proposed $300 billion in cuts has provoked agitation from the Democrats, but it does not go far enough.  The debt crisis will only be solved by fundamental changes, not simple cuts.  It’s not an issue of if, but when this debt will cripple our nation and start forcing us to scale back on truly necessary items like defense and the promises made by Medicare and Social Security.