The Debt Ceiling Debate is Back
The debate over raising the nation’s debt ceiling is back before Congress.
And once again, Republican leaders are drawing their line in the sand.
But the debate could hurt Arizona as it struggles to get its own triple A credit rating back.
The debt ceiling is kind of a technicality.
The money’s been spent, but Congress has to raise the ceiling on how much the federal government can borrow in order to avoid defaulting.
Last year a bipartisan coalition voted to raise it as a part of a broad compromise.
The group set up a special committee to slash trillions of dollars from the national debt.
That so called “super committee” failed.
And now Republicans, like Arizona Senator John McCain, want to set up a similar budget fight this fall.
“We think that mortgaging our children and our grandchildren’s future is not right," McCain said. "And that we have had $4 trillion, $3 trillion worth of debt in the last three years. We think that’s wrong. We think it’s got to come to a halt. Otherwise we’re Greece.”
The Speaker of the House John Boehner announced he won’t pass a debt ceiling increase unless Congress agrees to an equal amount of spending cuts.
Last year the partisan bickering over the debt ceiling led Standard and Poor’s to downgrade the U-S credit rating for the first time in history.
Arizona Democrat Raul Grijalva says he’s shocked Republicans are rehashing this issue once again.
“The speaker is engaging in some really twisted form of masochism here," Grijalva said. "We’ve been through this and in an economy that needs also to grow, not just to cut, here we are again potentially paralyzing services to the American people.”
Now, with many Republicans flatly refusing to support a debt ceiling increase, analysts worry the U-S may face more damage to its credit rating and potentially worse outcomes.
Arizona had its credit rating downgraded a couple years ago.
And economists say a further federal downgrade would mean more scrutiny for state governments and municipalities. Those entities are already struggling because they've seen their tax base's go down during this economic downturn, and a further downgrade could make borrowing money more expensive for the federal government, the state and cities - added pressure that local leaders want to avoid.
Grijalva says Republicans in Arizona and Washington just aren’t getting the message.
“Tax cuts and more tax cuts and then cutting services, laying people off," Grijalva said. "And the credit agencies felt that Arizona, just like this government - the federal government - is becoming more of a risk. Same pattern.”
But Republican Congressman Jeff Flake, who is also a Senate candidate, says the debate isn’t only about credit ratings.
“If we don’t get this debt under control it’s going to be a lot worse than a credit rating," Flake said. "We’re going to have a Treasury auction and have no buyers for our debt.”
And Flake said the debt ceiling debate is the perfect time to refocus the conversation in Washington. “I think every time you raise the debt ceiling you ought to have a discussion about spending levels, so I think the speaker is exactly right there.”
Jim Horney is the Vice President for Federal Fiscal Policy at the Center on Budget and Policy Priorities.
He says Flake and other Republicans are creating a false debate.
“The debt limit isn’t really the way to control what the federal government is spending or what the size of the deficits is (sic)," Horney said. "By the time you get to the debt limit we’ve already incurred obligations, we’ve bought things, we’ve paid benefits, and then it’s just time to pay the bills. And that’s just not the time to say, ‘oops, we’re not going to do that anymore.’”
The debt ceiling is just one of a handful of major issues facing this divided Congress before the end of the year.
But it’s an election year.
And that means lawmakers plan to spend more time on the campaign trail than hashing out their differences on the debt.