Debate about the Debt Ceiling Intensifies

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June 21, 2011

This week there have been a flurry articles about the debt ceiling and lawmakers’ efforts to reach a compromise prior to the August 2 default deadline.  Writing for Reuters, Andy Sullivan and Alister Bull call this a “make-or-break week” and note that lawmakers say they “will have to make substantial progress this week to ensure the country retains its top-notch credit rating.”  From the article:

Though the two sides have agreed in principle on a number of spending cuts, they still must overcome a stark divide over some of the biggest-ticket items on the ledger. Republicans have said they will not support any tax increases, while Democrats have resisted cuts to popular health programs.

The USA Today reports that Senate Minority Leader Mitch McConnell is suggesting a short-term increase in the debt ceiling until the two parties can reach an agreement on entitlement spending.  If such an agreement cannot be reached, lawmakers would have to return to “the same discussion” this fall.

In his blog for the Washington Post, Ezra Klein calls McConnell’s strategy “a very dangerous game” that is counterproductive “both for the economy and his stated goal of entitlement reform.”  Klein writes:

A debt-ceiling deal is difficult now. It’ll be much harder as the 2012 campaign heats up. The presidential candidates will be forced to take ever more irresponsible and extreme stands on raising the debt ceiling, which will make it much harder for the Republicans in Congress to sell their members on a deal. The unpopularity of raising the debt ceiling will be more of an impediment as we get closer to the election. Trying to cut a new deal over the debt ceiling every few months maximizes the possibility of something going terribly wrong, and is likely to introduce a lot of fear into the market at a time when the economy doesn’t need anything else to worry about.

The debate over budget cuts, entitlement spending, and tax increases will only increase in intensity as the default deadline approaches.  Teachers should encourage students to follow this discussion, noting the areas in which lawmakers are able to reach consensus and those in which they are not.  Students should consider the following questions:  Does partisanship increase or decrease as the election approaches?  Does that trend match your expectations?  Why or why not?

Students could discuss whether or not they agree with Klein’s assertion that McConnell is playing a dangerous game by suggesting short-term debt limit increases.  What are the benefits of such a decision?  What are the drawbacks?  Why does Klein feel that short-term increases would “introduce a lot of fear into the market”?  How might those fears impact the US economy?  Would that decision be better or worse than the alternatives (defaulting on the debt, providing a long-term limit increase, drastically cutting spending and/or increasing taxes, etc.)?  When students have developed their own opinions about these questions, they could write letters their representatives outlining their beliefs and making their feelings known to the members of Congress.

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