I've spent the past week or so trying to get my head around this whole "debt ceiling" debate that's raging in Washington. Clearly, it's important, but what does it really mean?
As it turns out, if the politicians screw up, it could be bad. Real bad.
Think of the debt ceiling as America's credit limit. The only difference is that the people we're borrowing money from don't set the limit, Congress does. At it's most simplistic, if we hit the debt ceiling, we can't borrow any more.
This is not necessarily a bad thing, unless, of course, we need to pay for stuff and we don't have enough money to do so. We spend on a lot of things, including our soldiers' salaries, social security checks, and all the other outflows that the U.S. has to make on a constant basis.
We also spend on a lot of stupid things and this, it seems, is the core of the debate. The Republicans think some of what the Obama administration is spending on is stupid. The Democrats think that what the GOP wants to spend on (mostly tax cuts for the super-wealthy) is stupid.
Congress, being one of the checks and balances (and run pretty much by the GOP) wants to put a ceiling on debt. This is both because they're completely against the Obama administration's spending practices and, because, if it all goes horribly wrong and the economy tanks further, they can blame the incumbent President during an election year. Yay, patriotism!
By contrast, there's some debate among Constitutional scholars (and their always lucid research team, the blogosphere) whether or not Congress can legally impose a debt ceiling. Section 4 of the Fourteenth Amendment to the Constitution has this handy little phrase:
The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.
Some people take that to mean that debts are always paid, and therefore, if we have to borrow more (even if it's borrowing to pay debts -- talk about stupid!), we'll do so.
This is, in fact, probably true. For support, let me point you to an article in Esquire called The Debt Debate's Real Doomsday Scenario. It's written by Tom Junod, who does not profess a party affiliation, but from his writing, it seems clear he's not exactly on the GOP's side this week.
In any case, Junod points out that the Treasury will pay our debts. The whole "full faith and credit of the United States" thing is at risk if we don't, and nobody really wants to see America's credit rating downgraded.
What this means, according to Junod's piece, is that -- assuming the debt ceiling isn't raised as President Obama would like -- the U.S. will pay its debts by pulling money from other operational budgets. In effect, we'll stop writing checks to anyone other than our creditors, until we can meet our credit obligations.
I can't tell you if Junod's read is correct. I'm neither a Constitutional scholar nor a banker. But I am something of an expert on national security and here's where I start getting concerned.
China is America's largest creditor. You can see it coming, can't you? Yeah, I know you can. Let's play this out.
If China is America's largest creditor, and we're going to have to pay our creditors before we pay for anything else, then who are we going to pay before we pay our social security recipients, our soldiers, and pay for all of our other operation expenses?
If you've ever wondered why I have so little regard for our politicians of both parties, this is one example. Their bickering, their constant efforts to put party before country, and the overwhelming influence of lobbying organizations have screwed up our nation's priorities.
Is there a way out of this mess?
I outlined a lot of ideas in How To Save Jobs, but those approaches require substantial changes in how we prioritize our national interests.
So why am I telling ZDNet's tech audience?
The bottom line is this. If our politicians don't solve this bitter dispute, we're likely to be sending money that might otherwise go to you, your employers, your schools, your military, and many other services that you rely on to China.
Call your Congressional representatives. Tell them to stop bickering and resolve this one way or another before we wind up paying China before Americans.
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