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WASHINGTON LETTER Oct-11-2013 (1,030 words) Backgrounder. With photos posted Oct. 10. xxxn
The economic and moral dimensions in debt-ceiling debate
By Mark Pattison'
Catholic News Service
WASHINGTON (CNS) -- No matter how one tries to parse it, every economic decision has a moral dimension to it.
Do you shop at Store A, with higher prices, or Store B, which has a reputation for treating its workers badly? Do you put your money in a bank or a credit union? Do you shop local? Buy American?
The same is true with one of the biggest economic decisions the United States has ever faced: Do we increase the national debt ceiling, or allow the federal government's borrowing power to run out Oct. 17? And what are the implications of either choice?
It's a script many Americans have seen before: A Democratic-led White House and Senate, fending off political assaults from a Republican-led House on issues from the "fiscal cliff" to sequestration to the as-yet-unresolved federal government shutdown, with both sides taking matters to the brink. Yet somehow this issue is less about another political rerun than the effects of the choices made by elected officials.
"There is a very ethical and moral concern here," said David Fiorenza, an economist and professor of economics at Villanova University, whose specialty is in public sector and urban economics.
"And it's really people who are in need. People who really do need Medicaid, or because they've exhausted all other possibilities of assistance. Children who still do not have parents at the age of 18. It's a moral duty for the United States to make sure those people are covered every month."
For Alan Gin, an economics professor at the University of San Diego, "the moral equation is if you tell somebody you're going to engage in a financial transaction with somebody, you're going to pay them" -- and that means everybody from debt holders to Social Security recipients.
"There is some talk among some people that the government should first pay the bondholder, paying interest on the principle," Gin added. But "how do you prioritize among the other categories? How do you define who gets paid and who doesn't?"
Charles Zech, another Villanova economics professor, told Catholic News Service that the mere act of paying some and not others would be extremely hard to do in practice. "The government writes thousands of checks every day," he said, "but it would be a nightmare to determine who goes first."
Zech said, "We've made some commitments here," including to "those who have been lending us money" and "the American people." Without a rise in the debt ceiling, he added, "we won't be able to continue the program areas we've committed ourselves to, like the Social Security program."
The range of options, according to Fiorenza, would all involve higher costs to the government, and by extension, taxpayers.
Not increasing the debt limit would result in the United States paying a higher interest rate for future borrowing, which would have to be taken into account the next time the debt ceiling needs to be raised. The cost of a federal jobs program to get people back to work would increase the budget deficit. If, as Fiorenza believes, it's the private sector's responsibility to create jobs, then the federal incentives made to employers to get those jobs created also costs a lot of money.
As of Oct. 11, the federal debt hit $16.7 trillion. The Obama administration wants Congress to raise the debt ceiling or not enough funds will be available to pay the nation's bills.
House Republicans said Oct. 10 they would offer a temporary debt-ceiling increase -- Fiorenza said it would take a $1 trillion increase to get the country through another year -- in exchange for an opportunity to talk with President Barack Obama on issues related to the government shutdown. Obama, for his part, has said he would welcome a short-term extension, but not one with GOP demands on other issues.
If there's no debt-ceiling deal and the government defaults on its obligations, the choice becomes more stark. What gets paid first: people's Social Security and veteran's benefits, which in turn would keep the economy going, or interest on the debt to keep the country's bond rating high and future borrowing costs low?
"This is the time the president should stand up and provide leadership and say, 'This is what we're going to do,'" Fiorenza said.
Zech said America is already hamstrung by its current debt, unable to launch broad-scale jobs programs that would get people off government assistance and paying taxes on their wages. Federal budget deficits have been pushed upward in the past five years because of joblessness aid, he noted; the current official unemployment rate is 7.3 percent, which does not take into account underemployed workers and those too discouraged to continue looking.
China buys a lot of U.S. debt, Zech said, because "it hardly does anything for its citizens" compared to U.S. initiatives.
Religious groups in the Circle of Protection coalition, which includes the U.S. Conference of Catholic Bishops, said at an Oct. 9 news conference that they had no idea how the dual dilemmas of the government shutdown and the debt-ceiling crisis were going to play out.
In response, they said members of their coalition would hold a "Faithful Filibuster" and stand outside the United Methodist Building, across the street from the Capitol, and read from the Bible whenever Congress is in session until the issues are resolved.
Kathy Saile, USCCB director of social development, said the Circle of Protection cares less how the stalemate is resolved than that it doesn't target the poor. For the USCCB's part, she added, it would like to see an accord include a more comprehensive accommodation for religious organizations with regard to the Health and Human Services' mandate on abortion and contraceptive coverage.
Circle of Protection members were reading -- even during a steady rain that descended on Washington in the days after the "Faithful Filibuster" began -- from the American Bible Society's "Poverty & Justice Bible" with 2,000 orange-marked passages that make reference to the poor.
At the news conference, the Rev. David Beckmann, a Lutheran minister who is executive director of Bread for the World, mused at what politics had come to.
"We could use some supernatural help, don't you think?" he said.
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