People run out of money. We don’t manage our money well and then get ourselves in debt.
Many Americans know what it is like to run out of cash. According to one study, 54 percent of U.S. consumers live paycheck to paycheck, including 53 percent of those who earn $50,000 to $100,000 per year.
But how about nations? Perhaps they’re better at managing their money.
In a recent letter to congressional leaders, Treasury Secretary Janet YellenJanet Louise YellenOn The Money — GOP blocks spending bill to kick off chaotic week in congress GOP blocks debt limit hike, government funding This week: Democrats hit make-or-break moment for Biden MORE warned that without raising the debt ceiling, “the most likely outcome is that cash and extraordinary measures will be exhausted during the month of October,” and that "waiting until the last minute" to tackle the issue could "cause serious harm to business and consumer confidence."
America is at a financial tipping point and, once again, could face a government shutdown. Congress must bail us out.
But congressional bills are piling up like cars on a heavily congested highway. And with slim Democratic majorities in the House and Senate, every piece of legislation is held hostage to budget considerations.
Democrats want their reconciliation bill on so-called “soft infrastructure issues” such as schools, child care and climate change, and most in both political parties want the hard infrastructure bill passed by the Senate, which covers roads, bridges and rural broadband, among other things. There is also a defense authorization bill waiting in the wings as well as bills to address natural disasters and migration flows from the recently ended war in Afghanistan.
To be fair, we have been in this kind of financial jam before — in 2019 when both parties in Congress along with the Trump administration agreed on a two-year don’t-rock-the-boat budget deal. Unfortunately, the deal expired on Aug. 1, and the political gamesmanship has started up again.
So, what choices do we have?
One option Democrats are weighing is to attach a debt limit increase to a bill that must pass by Sept. 30 in order to prevent a government shutdown — a stopgap “continuing resolution,” since Congress isn’t getting any of the 13 regular FY 2022 appropriations bills done when the new fiscal year begins on Oct. 1.
Another option is for our government to spend less money.
According to the Congressional Budget Office’s (CBO) budget projections (called the baseline), the federal budget deficit for fiscal year 2021 is $3 trillion, nearly $130 billion less than the deficit recorded in 2020 but triple the shortfall recorded in 2019. Relative to the size of the economy, this year’s deficit is projected to total 13.4 percent of gross domestic product (GDP), making it the second largest since 1945, exceeded only by the 14.9 percent shortfall recorded last year. The economic disruption caused by the coronavirus pandemic and the legislation enacted in response continue to weigh on the deficit (which was historically large even before the pandemic).
Trimming government expenditures would be painful, but there might be no choice. The Social Security trust fund is what most Americans rely on for their retirement. The fund will run out of money in 12 years, one year sooner than expected, according to an annual government report. The report stated that circumstances exacerbated by the COVID-19 pandemic threaten to shrink retirement payments and increase health care costs for Americans in old age sooner than expected.
There is so much that America needs and wants. And just like individual Americans, we try to live within our means. When we can’t, we default on our loans.
Defaulting is a bad option for everyone — sending a terrible message around the world about our reliability. A full default by the U.S. government has never occurred. But fights over the debt ceiling have occasionally unnerved investors. In 2011, when Republicans demanded policy changes in exchange for a higher debt limit, stock prices fell amid the uncertainty, and Standard & Poor’s downgraded the U.S. debt rating.
The best solution for our fiscal woes is the hardest one: bipartisanship. If both political parties put aside their differences and work together in September and October, we might just get through this upcoming financial crisis and discover a new national spirit of generosity to help each other and the nation.
This week marks a Jewish holiday called Yom Kippur. The theme is forgiveness and atonement. It is a time to repent for the sins of the past and rededicate ourselves to working as a community to do better in the next year.
Maybe our policymakers should do the same.
Tara D. Sonenshine is a former U.S. under-secretary of state for public diplomacy and public affairs.