As we approach the Aug. 2 deadline for raising our debt ceiling, we must consider one of the only things both sides agree on -- the national debt limit should represent our nation's commitment to sound fiscal management of our government. Therefore, we must admit that the act of raising the debt ceiling proves that Washington has failed fiscally and economically to manage the American taxpayer's money.
Ironically, if the United States is able to raise its ceiling, clearly the ceiling was artificial to begin with. Apparently $14.3 trillion is not America's borrowing limit. If we do nothing, our debt is on track to soar past 80 percent of our gross domestic product (GDP), a level not seen since WWII. Should we fail to immediately institute meaningful spending cuts and policy reforms, our country is headed towards its true debt ceiling in a matter of years.
In simple terms, if we do not solve our debt problem now, raising the debt ceiling will no longer be an option in the future -- a reality that faces nations like Greece and Portugal.
Our $14 trillion (and rising) national debt is not just a bill for tomorrow's generation -- it has damaging effects on today's economic environment. The relationship between high national debt and low economic growth is not just a coincidence.
The country's fiscal situation is, at its core, not difficult to comprehend. Even though the Administration announced the end of the recession in mid-2009, we have experienced over two years of slow economic growth and a national (and North Carolina) unemployment rate of over 9 percent. Consequently, this has caused a drop in the Federal government's revenue. If we stop right there to consider this reality the same way any family must in order to balance its budget, the solution is simple: find ways to make do with less.
The world invests in the U.S. because we have a history of honoring our obligations, and have always had the fiscal capacity to do so. However, just this year, the Big Three credit rating agencies (Moody's, Standard & Poor's, and Fitch Ratings) issued warnings or negative outlooks on the AAA rating for the United States government, which influences everything from the value of the dollar to mortgage interest rates.
If we continue to allow our debt to consume our economy without producing a credible plan to balance our budget and pay our bills, we risk foreign investors becoming reluctant to buy our debt. This will cause interest rates to rise, making it harder to finance our trillion dollar deficits (which, annually, already cost taxpayers hundreds-of-billions of dollars in interest) without raising taxes and further crippling our economy.
This global impact will be felt at the local level. The cost of borrowing for families and businesses will rise, diminishing the ability of small companies to invest and grow, resulting in fewer jobs and an indefinite recovery.
This terrible scenario can be avoided, but we must be honest with ourselves and act now. The Federal government has grown to an unsustainable level, and we can't be scared to cut programs that benefit a select few when the health of our economy hangs in the balance.
Last week, House Republicans took the lead towards restoring certainty in our economy by passing the Cut, Cap and Balance Act. I have cosponsored this legislation, which makes the real cuts and reforms needed to get the debt under control and protect the economy from a loss of our AAA credit rating. Cut, Cap and Balance will cut nearly $6 trillion from the budget over the next 10 years, place enforceable caps on federal spending, and require Congress to pass a Balanced Budget Amendment before the debt limit can be raised.
Today's face-off over the debt ceiling is simply a warm-up for a rapidly approaching realization of our genuine debt limit, which will force the United States to restructure its debt or default, compromising our economy and future. Balancing the budget isn't rocket science -- and it's time for Washington to stop treating it that way.