Pattye Benson

Community Matters

Debt-ceiling crisis – America could lose its triple-A credit rating . . . what about Tredyffrin Township and our school district

How do we keep our dominoes from starting to fall and our house of cards from crashing?

The debt battle in Washington is raging. The deadline by which Congress must decide to increase the nation’s debt limit or find ways other than borrowing to pay the interest on the huge national debt, is only days away. The consequences of failure are unthinkable to this country. Whom will Uncle Sam pay if there’s no debt deal – the Veterans, Medicaid beneficiaries, Social Security recipients? The clock is ticking down . . . the country is running out of time.

The finger-pointing . . . the political gamesmanship . . . makes you feel like you’re living in the twilight zone. Some suggest that the U.S. only needs to mint one or two trillion-dollar coins as a plausible way out of the debt-ceiling debate. Or that perhaps President Obama should invoke the 14th Amendment to raise the debt ceiling if Congress cannot come up with a satisfactory plan before the Tuesday deadline.

The standoff between lawmakers goes on – the political posturing and name-calling endless. A very real fiscal catastrophe is at America’s doorstep – and Washington’s stalemate is a disservice to all of us. Americans do not want our government to default on its debt obligations. We want compromise from our lawmakers yet they don’t seem to hear (or care) what we think. Why isn’t Washington listening to the people . . . why is a middle-of-the-road compromise seemingly impossible?

What would a debt default mean for the country, for the state, for our township and our school district?

If the United States does lose its Aaa bond rating, we could potentially see a financial crisis unleashed because it will also mean that there will almost certainly be a wave of credit rating downgrades across the country. Moody’s Investors Service is saying that the U.S. risks losing its Aaa credit rating if it defaults on its debts – even for a short period of time. Whether or not America sees its credit rating downgraded right now, the truth is that at some point, the credit rating of the US is going to go down and interest rates will likely go up.

What’s to stop the ripple effect of a federal government credit downgrade? Nothing . . . the nightmare will not end at the national level. The truth is that the credit ratings of state and local governments across the country will likely be reviewed and downgraded as well. The federal government has never lost its Aaa credit rating; this would be totally uncharted territory.

The national economic nightmare places Tredyffrin Township and the T/E School District in a precarious situation – jeopardizing its Aaa credit rating.

How do we keep our dominoes from starting to fall and our house of cards from crashing?

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  1. Authorizing a debt ceiling increase simply allows the federal government to pay the bills coming due that Congress has already authorized. It does not represent any new spending at all, and that is why any lawmaker who fails to vote for a clean and sufficient increase will violate his or her oath of office (see the 14th Amendment.) We should impeach any member of Congress, regardless of party, who fails to uphold the ability of the US to pay its lawful debt.

  2. Should Obama invoke Amendment 14 – absolutely. But he should not mention it even one second before he invokes it. But invoke it he should. And when he does, he should tout the action as risking himself for his country and blister the Rep congress for failing to do its job.

    We are in the midst of a revolution and most of us are not even aware of it. What better way to mount a revolution if not from within? We are under attack by the Tea Party. It’s not that the Tea Party misunderstands Economics 101 and are not aware that failing to raise the debt ceiling will have catastrophic results, they know exactly what they are doing. They are trying to bring down the US Government. The tea partiers are driven by religious ideology that is opposed to our government, social programs of any kind, and a goal of privatizing everything from education to all public sector jobs.

    1. All hail King Obama! Why are Americans so happy to consolidate as much power and place their hopes on the back of the President? Does it ever work?

  3. Religious ideology? Not sure of that.
    They want to starve the beast, and the reason Obama is struggling in this “negotiation” is that he voted against the exact same request under Clinton. The only reason the tea party is influential is because they represent a voting bloc. Moderates are the ones who decide — “the vast middle”– most things ultimately, but they are not a voting bloc that can be contacted or reasoned with, so they are left out of the negotiations.All you politicos out there — how can you trump the Tea Party dog and pony show? With a show of your own. But no emergent leaders?

    1. I don’t want to turn this post of Pattye’s into a political blog…But the republican party started to abandon the moderates 10 years ago & they haven’t stopped. First it was the religious right & now the teabaggers. They refuse to bend or negotiate. It’s their way or the highway. Consensus – civility? No way. The rank & file republicans are afraid to vote against them because they’re afraid of a primary challenge in the next cycle. The problem with that is most of the teabaggers can’t win a general; thus a democrat will win. We’ve seen how crazy they are. It’d be better if the moderates ran as independents; then maybe they’d have a chance. I was told not too long ago that the TBs wouldn’t be around in 2 years. I don’t see that happening until the voters turn them out of office. Will saner heads prevail, I don’t know. Presently as far as the dog & pony goes, when a modrate is up against a TB, the TB wins; the numbers aren’t there. Just take a look at your local elected officials.

      1. moderate girl, the tea party, (not tea baggers) is here as a counter balance to the very liberal left that has taken a bad situation and made in seriously worse. They were elected to office with a mandate, just as Obama and his guys were elected with a mandate.. You know “hope and change”. So we are here with divided government as an attempt to but the brakes on runaway government. I know this may sound like finger nails on a chalkboard, but there are many “middle American folks” who support the idea of limited government growth and who don’t like what has happened in the last 30 months, and want hope and change again. For every action there is a reaction. This is what has happened.Unfortunately, as I see it, Obama will probably be re-elected because of the incredible amount of “special interest group” money that probably can’t be matched as well as a media that will support him and convince the masses he is the new Chosen One, again.The only hope is that Congress will have more tea baggers… whoops… tea party folks who will brake this runaway train.

        If there was no Republican majority in the House, it would be business as usual. In fact it really is still business as usual, except that Obama is trying to come across as a moderate. Truly amazing. Just give him the money! The discussion has been joined.

        There is no mention of specific cuts, except if no agreement is reached in November. SS, Medicare and 50% of the cuts come out of military. Brilliant. But I bet the good old federal government, big daddy if you will, will still send money to the states.

  4. There definitely are implications in the federal debacle for us here in Tredyffrin, but I’m not sure that a downgrade of our ratings would follow on a default and/or downgrade of the US debt.

    I think it was Obama that said recently something to the effect of not be able to have a triple-A financial rating without a Triple-A governance system. It’s clear that the US has lost the latter. We expect politicians to govern, but instead they are concerned just about fighting an endless battle for power and jobs – their jobs and those of their cronies, not ours! Interestingly technology has played a big role: for example technology to enable micro-gerrymandering, to lower fundraising costs, to proliferate cable TV channels, for example. The result is polarization and gridlock.

    And it’s gridlock in Washington that translates to gridlock in the economy. “Job creators” don’t really care if the federal spending gets under control through spending cuts alone or spending cuts and revenue increases (unless, in the short term, they get their revenues from government). What they want is the reduced risk that comes from knowing that there is a plan, and the increased demand that comes from consumers knowing that there is a plan.

    And just three words for those who would like to cut government spending to a fixed and lower percentage of GDP: Baumol’s Cost Disease. By their nature, the labor-intensive services provided by the government will inherently have lower productivity growth than capital intensive manufacturing sectors. The percentage of income spent on TVs and computers will drop; the percentage spent on education and healthcare will rise. What we have to do in those service sectors is to tie wage growth sectors to the overall economy and to improve productivity as much as possible.

    So, back to the township and school district. Do we have Triple-A government? One that’s not about power and favors for cronies? One that demonstrates that it can effectively provide local services at the greatest increase in productivity possible? The record seems pretty good, but with some glaring exceptions. Maybe the coming elections will provide an opportunity for voters to shift the balance a little more towards those that really understand what it takes to govern and grow.

  5. As a veteran and as an American citizen, I feel so helpless (& hopeless). The politicians dont give a damn about us, only the next election. This country is doomed – where is the leadership?

  6. The Senate just approved the Debt Deal that the House voted on last night.
    Crisis averted.

    All’s Well That Ends Well.

    1. I don’t think so. Wait until November & December to see what this “commission” does, if anything. Consensus, I doubt it. Then see what happens when the “triggers” kick in. As a senior, I can’t afford additional hits to my IRA (haven’t made up those prior losses) and cuts to my SS (no COLA again).

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