The Debt Crisis
Imagine a family that earns $50,000 a year but is spending more than $88,000 with a credit card balance of $330,000. The discussions around the kitchen table are likely to be a little tense.
Proportionally, that’s where Washington’s finances are today, and that’s why the national discussion is a little tense, too.
Even these figures belie the magnitude of the fiscal crisis. Shutting down the entire federal government and firing every federal employee is no longer enough to balance the budget. Mandatory spending – mainly entitlements – consumes more than the government takes in.
Fortunately, revenues vastly exceed debt payments, so threats of an actual default are so much flimflam. The President has both the legal authority and Constitutional obligation to prioritize payments to prevent a default. The problem is that a lot of other bills would go unpaid, causing a downgrade to the nation’s triple-A credit, forcing up interest costs, wiping out all of the savings now on the table and jacking up everything from mortgage interest costs to family credit card rates.