Raising the Debt Ceiling took center stage on the Sunday talk-shows as ‘official Washington’ returns to work this week. President Barack Obama’s head of his Council of Economic Advisers, Austan Goolsbee appeared on ABC’s “This Week” with host Jake Tapper, warning of catastrophe if the National Debt credit limit is increased. Over at NBC’s “Meet the Press”, Senator Lindsay Graham (R-SC) threw down a gauntlet that he would only support an increase if coupled with spending cuts and reforming Social Security.

debt ceiling US
Image Source: U.S. Treasury

Not exactly the most ‘Conservative’ light-bulb in the GOP ranks, Graham wants deep spending cuts, as well as means-testing and other measures to keep Social Security solvent. Back at ABC, Goolsbee said of a failure to raise the Debt Ceiling “This is not a game. If we hit the debt ceiling, that’s essentially defaulting on our obligations, which is totally unprecedented in American history.” Goolsbee went on to charge that such an event could be a worse financial disaster than the Crash in 2008. He added “I don’t see why anybody’s talking about playing chicken with the debt ceiling.”

The 111th Congress led by Democrats and Nancy Pelosi failed to deliver a proper budget for this fiscal year. Instead, a series of continuing resolutions were passed, the latest funding the Federal government through till March. The current Debt Ceiling was set by the 111th Congress at $14.3 Trillion dollars. With the Federal government spending $8 Billion dollars per day more than it takes in from taxes, etc., America will hit the present Debt Ceiling sometime in April.

The incoming Republican-controlled 112th Congress takes charge this Wednesday. Swept into power thanks to the Tea Party and the economy, reducing spending is high on the list of priorities. Representative Michele Bachmann (R-MN) appeared on CBS’s “Face the Nation” Sunday to affirm that she and the GOP majority will be focused on shrinking the Federal budget. This was also echoed by Senate-elect Mike Lee (R-UT) on “Fox News Sunday”.

When taking office in 2009, Obama and the Democrats raised discretionary spending some 24% immediately, on top of the stimulus bill and other big-ticket spending programs, such as the health care reform act passed last year. More than $3 Trillion dollars of new debt was added to the already massive $10.5 Trillion dollar National Debt during the first two years of the Obama administration. They justified this action under the Keynesian economic principles of spending your way out of a recession, something that historically has never worked.

As of today, the U.S. National Debt stands at $13.939 Trillion dollars. At the presenting spending rate of $8 Billion dollars in new debt per day, America will hit the $14.3 Trillion dollar debt ceiling in about 45 days. Much sooner than analysts predictions of April or May. A showdown between the White House and the GOP Congress over this issue will be the most significant story for the next few weeks and tell us all what to expect for the rest of the next two years till the next election.

Austan Gollsbee, who heads the Council of Economic Advisers for the Barack Obama White House, warns that failure to raise the Debt Ceiling would lead to disaster. He stated during ABC’s “This Week” that “The impact on the economy would be catastrophic. I mean, that would be a worse financial economic crisis than anything we saw on 2008.” Republicans, even the likes of Senator Lindsay Graham (R-SC), is calling for coupling any increase in the Debt Ceiling with spending cuts. The GOP strategy would seem to be returning spending levels to those of 2008, which have ballooned about 40% since Obama took office. Raising the retirement age and adding means-testing to Social Security are also on the table to ensure it remains solvent in the years to come.

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