President Obama and congressional leaders are currently in negotiations to avoid debt default. Obama is refusing to budge on raising the $14.3 trillion debt ceiling.
“Never before in its history has the United States defaulted on its debt. The debt ceiling is not something that should be used as a gun against the heads of the American people to extract tax breaks for corporate jet owners, or oil and gas companies that make billions of dollars because the price of gasoline has gone up so high,” said Obama.
Obama is insisting to congress that the issue not be extended, but resolved now. If negotiations fail, the Treasury will not have enough money to pay government workers and keep government institutions, like state parks, operating. Obama has set the deadline for reaching an agreement at August 2nd, while others argue that July 22nd is a more realistic date given the amount of time needed to set the deal (if any) in motion.
Failure to raise the debt ceiling could have far reaching, even catastrophic results. Many political pundits foresee the U.S. falling back into a recession, unstable foreign markets and a threat to the U.S. dollar’s reserve status. If the government defaults, the 2008 bailout will look like a tiny ripple in comparison to the tsunami that will come.
Imagine the U.S. unable to make good on its debts. Bank loans would be virtually unattainable since bank funds would be insured by an unstable source—our own treasury.
In the next couple days, democrats will have to make a firm stand or forfeit their demand for increasing taxes on wealthy Americans and corporations. Republicans will have to scale down or forfeit their demands on cuts to Social Security, Medicare and Medicaid. A thick line has been drawn in the sand.
Congress has been stuck in a stalemate for two years; can they set aside politics for a while and get down to business? Much more is at stake than getting re-elected.