Don’t play with debt ceiling

Opinion: July 6, 2011 at 12:00a.m.

Miami Herald: With the deadline for raising the debt ceiling just one month away, it’s worth asking what’s to be gained by the posturing that prolongs the deadlock in Congress and threatens the creditworthiness of the U.S. government. The answer is, Nothing, but keeping the political suspense alive has a downside.

Every day that passes as the Aug. 2 date nears without a deal increases the anxiety and uncertainty in the markets and that alone serves as a brake on economic activity. A default would once have been deemed unthinkable by American leaders, but if the debt becomes hostage to political maneuvering every time the debt ceiling has to be raised, it’s going to cost more to borrow money and attract bond investors. No American benefits from a default. Even the current stalemate is serving as a drag on the markets.

There was a time when such increases in the debt ceiling were considered routine. Republicans did it several times when they controlled Congress under President Bush. The unwillingness to go to the brink over the debt ceiling reassured investors. That and the fundamental strength of the economy made the dollar the world’s most trustworthy currency. Even in the darkest days of the current worldwide economic slowdown, the dollar became a refuge for those who sought to put their own wealth in a safe place while the storm raged.

Comprehensive response

What is different now is the ideological insistence that revenue increases will not be considered. The government has to bring spending under control. No one seriously argues that the United States can tax itself out of this budget crisis. But a comprehensive solution has to include changes in the tax structure to close loopholes and increases for those who don’t have to worry about sinking into poverty anytime soon.

Give the Republicans credit for holding the administration’s feet to the fire. Without party unity and an insistence on fixing the deficit, the argument might take a back seat, using the fragile recovery as a pretext to avoid taking any action.

But playing chicken with the debt ceiling is the wrong approach. Failure to bring the national debt under control threatens America’s future, but a default on the U.S. debt would leave the nation even more poorly prepared to deal with long-range problems. Make a deal now.