The federal government hits the debt ceiling Monday, and Treasury will shuffle money around to avoid economic catastrophe. In fact, it look likes Treasury will be able to work with various accounts so it can meet its obligations at least through August 2.
Thus, no immediate global collapse, but the risks multiply. In a letter Friday, Treasury Secretary Timothy Geithner wrote: “A default would inflict catastrophic, far-reaching damage on our nation’s economy, significantly reducing growth and increasing unemployment.”
Agreed. The current state of affairs is untenable, worsening the sense of uncertainty that is the enemy of investment and economic growth. Sixty-one national, state and local business groups — including the National Association of Manufacturers — last week sent Congressional leaders a letter urging action to raise the federal debt limit. From the letter:
Raising the statutory debt limit is critical to ensuring global investors’ confidence in the creditworthiness of the United States. With economic growth slowly picking up we cannot afford to jeopardize that growth with the massive spike in borrowing costs that would result if we defaulted on our obligations. It is critically important that the United States stands fully behind its legal obligations.
In making this recommendation, we remain extremely concerned about the level of the federal debt and large annual budget deficits and remain committed to working with you and the Administration to address our Nation’s fiscal challenges. Tough calls on U.S. spending must be made as part of a debate about the budget and we agree that restoring balance to our fiscal position will require that the government spend less and spend more wisely.
- Wall Street Journal, “Stakes Rise on Debt Vote”
- Financial Times, “Businesses step into US debt limit battle“
- Bloomberg, “Wall Street, Business Groups Press Congress to Raise Debt Limit”
- Wall Street Journal (blog), “Business Groups to Congress: ‘Raising Debt Ceiling Is Critical’
- The Hill, “Business groups to Congress: Raise the debt ceiling“
Meanwhile, Tim Carney of The Washington Examiner finds in the business association letter what he always finds, evidence of “big business” getting in bed with the federal government. You know, unprincipled rent-seeking plutocrats like those at — well, let’s check the letter’s signers — the Oshkosh Chamber of Commerce, Northeast Pennsylvania Manufacturers and Employers Association, the Colorado Association of Commerce and Industry. Come to think of it, the National Association of Manufacturers has thousands of small member companies.
Smaller companies, too, tend to dislike uncertainty and shrink at the idea of the federal government defaulting on its obligations.