Treasury Secretary Jack Lew just announced that the Federal Government will again reach its debt ceiling around 3/18.
There will be predictable nonsense about how much debt we have taken on as a nation, and how this is around 100% of GDP, and how the Chinese can manipulate us, if they want. I'll attempt a few words of clarity....
* The Chinese can't manipulate us. We could, in fact, unilaterally cancel all debt payment obligations, which would simply whack our credit ratings for a while. This really isn't about China or any foreign debt holders; this is about the status of our national debt as the absolute safest security, the so-called zero-risk asset.
* That US debt is in such high demand is a good thing and a bad thing. It allows us to, in essence, spend more in the near term, but....
* ...There is Federal spending and then there is Federal investing. Which are we doing? I am not convinced that the current leadership in either major party knows the difference. We need clarity, more than ever before.
* The Tea Party fringe that adamantly opposes any debt ceiling increases is not proposing any workable solutions. They really do believe that shutting the machine down is a solution- it's not.
* Shutting down the government or forcing 'extraordinary measures' is expensive. It does not save money, in fact it costs us a lot more. A protracted shutdown would do a lot more damage than just the direct costs, it'd raise the long-term cost of our debt payments. Imagine you tell your bank you're just join to skip some payments... what happens to your interest rate? Any sensible person knows that you have much more bargaining leverage after you rein in your debt!
* In a functional government, the debate would be about how to bend down spending and increase investing. The US is in a fantastic position to invest very strategically, in ways that would put our kids and grandkids in a position of leadership for the next century. Will we do it? Well...
* ...the big problem here is that our leaders think in terms of short-term election cycles, not longer term investment. It's all about attempting to whack the other side right before the election, and playing to the base before the primaries. This mentality is the polar(ized) opposite of what we need to set up long-term investments.
I could go on and on but will refrain. Just... please don't vote for someone whose entire political vision is to shut the thing down. It benefits no one but a few politicians in districts where financial education is lacking. (Politically incorrect, but sorry, it's true)
Why we don't bring back "civics" and infuse real financial education? It's urgent that our kids understand the basics, because clearly a lot of adults do not. On both sides.