2013 has been a hard year for many of us. We have seen friends lost, dogs lost, and some deep personal crisis. We have also seen some very great people on the world stage lost including Nelson Mandela and James Gandolfini (aka Tony Soprano).
But what many of us in the world failed to take note of was the battle to raise the United States debt ceiling. This is usually a routine procedure that attracts little or no attention.
This time some 44 Republican congress men and women who ally themselves with the Tea Party decided that enough was enough. They decided that it was time for the United States government to start living within its means.
I am not a political supporter of these people. But they do support a universal truth-all of us must live within our means or suffer dire consequences.
These 44 politicians took the simplistic view that it was time to “cut up the credit cards” and start living on income actually collected. (Almost 5 years ago Elena and I did this and it has improved our lives. We exhausted our savings account paying credit card companies.). I suspect that there are many of you around the world who have done this and understand where I am coming from.
The personal finances of a household or the finances of a company are not the same as the finances of a country.
Had the US debt ceiling not been raised, we would have had a technical default on US government securities. (This is not to say that the US government would not stop paying its debts. Rather it would not pay them right on time.) An international panic would have followed. Money would move quickly to other areas of perceived safety (Swiss francs, gold, other viable government bonds, etc.) Stock markets would have temporarily crashed. Unemployment would go up all over the world.
The US Secretary of the Treasury would find himself in a position of a household where there had been a big drop in salary. Priorities would have to be set. The debt service on bonds and T-bills would have to be paid first. Then whatever was left would go to pay for the military. Social Security. medicare, etc. There would be a big legal question as to whether the secretary of the treasury had the authority to do this without the approval of congress. Conservative groups would have filed lawsuits challenging the whole procedure. Chaos would have followed.
These 44 politicians had billions of dollars in support from conservative groups like the Heritage Foundation. They had Republican house speaker John Boehner totally intimidated and “backed into a corner.”
What happened to avert a cataclysmic international disaster? On the senate side, Senator Mitch McConnell got a new $2.9 billion dollar dam project in his native state of Kentucky. This will create a large number of jobs there. It will help him to be reelected in 2014.
What happened to get the 44 Republican politicians in the congress to ease off their demands for a balanced budget? I honestly do not know. I suspect that literally a huge amount of money “went under the table” in some way to them. The politicians will never tell the truth about what happened here.
We came within one tenth of one percent of a worldwide financial catastrophe. All of us should be thankful that it did not come to pass.