The Path of Fiscal Irresponsibility
Posted on December 30, 2005
U.S. Treasury Secretary John Snow issued a warning: if Congress doesn't raise our national debt limit, the government will run out of cash in two months.
In a letter to Senate leaders Thursday, Snow said the statutory debt limit imposed by Congress of 8.184 trillion dollars would be reached in mid-February and the government would then lose its borrowing power. "At that time, unless the debt limit is raised or the Treasury Department takes authorized extraordinary actions, we will be unable to continue to finance government operations," said the letter, seen by AFP.Raise the debt limit? That means we're going to try to borrow even more money from our biggest creditor, the Chinese government. The fiscally irresponsible decisions made by this administration over the past four years are starting to take a serious toll. Raising the debt limit is a short-term fix for our financial problems: it's like handing a heroin addict a small dose of the drug to "tide him over." But the dose will be used up and the addiction to spending remains. And what happens when even the Chinese won't lend to us any more?Snow warned that even if the Treasury took "all available prudent and legal actions" to avoid breaching the ceiling, "we anticipate that we can finance government operations no longer than mid-March". "Accordingly, I am writing to request that Congress raise the statutory debt limit as soon as possible."
The Republican-led Congress last voted to increase the debt limit in mid-November 2004, despite opposition from Democrats who demanded the free-spending federal government tighten its belt instead. The US debt limit sparked bitter partisan battles in the mid-1990s between a Republican-dominated Congress and the Democratic administration of president Bill Clinton, leading to shutdowns of the federal government. Once the US government hits the ceiling, it comes under threat of defaulting on its debts and can lose the ability to raise future credit on the capital markets.
Snow underlined that the "full faith and credit of the United States" was a unique selling point on the markets. "A failure to increase the debt limit in a timely manner would threaten this unique and important position," he wrote in his letter.