Now that President Obama has achieved an increase in the debt ceiling, can the citizens of the United States expect to see our economy get better? The answer is NO! The United States have a history of spending more money that it receives in revenue, and this is the main problem with our government. By raising the debt ceiling, we just allowed the government to continue borrowing the money that it "needs," but this only raises our deficit even more.
I analogize this issue with credit card debt, something that many Americans can relate to. Lets say that an individual has an American Express card with a credit limit of $5,000. Now lets say that this individual has used the maximum amount of $5,000 and is only able to pay the minimum payment every month of $100. But after making the minimum payment, the individual finds a way to use the available credit every time. As a result, the debt is never reduced, it is only sustained. Now lets say that this individual wishes to increase their credit limit so that they may borrow more money, but they are already living above their means and has more debt than income. Would it be wise for a credit card company to increase their limit based on their history of payments and debt to income ratio? A wise credit card company would refuse to increase their limit until the individual has proven that they can afford to pay a substantial amount of the credit already used on a consistent basis. The United States government, however, treats its credit as if it was owned an American Express "Black Card" with no limitations. Every time it reaches the debt ceiling and cannot raise the revenue to reduce it, it simply increases its credit limit. Don't we all wish we could do this? If it continues to have the ability to increase its debt ceiling, what incentive does it have to pay back its debt? It could simply continue to raise its limit, and make the minimum payment. So in reality, it is only sustaining its debt, not reducing its debt.
There have been suggesting made that the government needs to make some cuts on governmental agencies and spending, but have yet to be done. Some also suggest that the government raise taxes in an effort to generate revenue (the feasibility of these measures will be discussed in another segment). However, no such measures have been taken, and I am not surprised. What incentive is there to do so when the debt ceiling has been raised and it has the ability to raise it again so that it can continue to borrow the funds that it "needs". I wonder how long it is going to take the creditors before they stop lending money to the United States? How long will it take before they refuse to invest in our bonds and securities and take their money elsewhere?
There is great concern about our AAA credit rating declining, and I fear that it will soon become a reality. No responsible borrower operates the way that the US government has operated over the past presidential terms. Individuals are often cautioned not to live above their means, and I think that it is time the US government receives the same caution. It is time to make some serious cuts and focus on increasing revenue. Raising the debt ceiling did nothing more than prove that the United States government holds a "Black Card" with no credit limit, but it has yet to prove that it is a responsible borrower.
Is our Economy now in a better position? Maybe, but I highly doubt that we will make any progress until our government starts proving that it understands the words "deficit" and "budget." We will always have the former if we do not know how to accomplish the latter.
-Kerriann E. Sheppard (Law Offices of Sheppard & Associates)
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