State unemployment numbers were released last week and – guess what? – Flathead County’s is exactly the same as it was one year ago. The non-seasonally adjusted jobless rate in June was once again 11.4 percent. Meanwhile, as places like Northwest Montana tread water, Washington is doing its best to make things worse.
Before now, when the nation’s debt ceiling (or how much the government can legally borrow) was raised, few noticed. In fact, since March 1962 the debt ceiling has been increased 74 times, and about 10 times since 2001, according to the Congressional Research Service. The country is almost always operating on credit, now more than ever.
But as the weekend waned, Democrats and Republicans were far apart on a deal to allow the government to pay the bills it has already incurred. Each side has conditions before they will agree to continue sending out checks – mainly, how much to cut spending and how much to increase revenue.
Imagine if you or I decided to spend lavishly over the next year. We repaved the driveway, installed a wet bar and gave some random friends money so they might like us more. We charged all this to the Visa and, when the bill came, we decided not to pay it. In that case, Visa may do a variety of things. None of them good. Ruin our credit? Force us into bankruptcy? Garnish our wages?
But few know what exactly will happen if the United States defaults on its loans of some $14 trillion. All we know is the Treasury Department wouldn’t be able to borrow any more money. At the least, it will shake up world markets, especially our own, and decrease the value of the dollar. Eventually, the result could be a partial government shutdown.
So what’s Montana’s U.S. delegation’s plan? Republican Congressman Denny Rehberg is in favor of the so-called “cut, cap and balance” bill. That legislation would cap federal spending to 19.9 percent of gross domestic product by 2018 and require Congress pass a Budget Balanced Amendment in exchange for raising the debt ceiling.
“This is how a representative government work,” Rehberg said after he voted for the bill in the House.
The legislation quickly died in the Senate and was panned by many economists, including five Nobel Laureates, for its potential to further harm the economy, making future recessions worse and forcing draconian cuts to major government programs.
Montana Sens. Max Baucus and Jon Tester also piled on, saying that it would wipe out Social Security. But until recently, the Senate has stood on the sidelines as President Barack Obama and Republican leaders in the House tried to broker a deal. Then that fell apart.
Of course, this wouldn’t be a proper Washington drama if “The Gang of Six” didn’t swoop in. And the bipartisan group of Senate gang members proposed a plan that through both cuts and revenue increases would save up to $9 trillion over the next decade. But that also has its own share of critics. The Left has criticized it for cutting too much. The Right says provisions in the plan to overhaul the tax code to raise revenue represent a tax increase in disguise.
A default, almost every economist agrees, would drive up borrowing costs for everything from mortgages to small businesses. Remember 2008 when Lehman Brothers collapsed? It could look a lot like that.
Still, as you read this most believe a deal will be reached. But even if it is, many of your 401ks and other investments are losing money while the debate slogs on. And few of the country’s citizens, especially those in Northwest Montana, can absorb another economic blow.