Saturday, September 28, 2013

In this country, our word is our bond. The respect and admiration that the United States and its institutions inspire around the world are based on the certainty that when our nation makes a promise, we keep it.

Frank Keating
Said Frank Keating, president and chief executive of the American Bankers Association and a member of the Bipartisan Policy Center’s Debt Reduction Task Force, in an article titled "We can’t afford to default on the debt" published in Washington Post of September 27, 2013. Frank Keating was governor of Oklahoma from 1995 to 2003.

According to Frank Keating, the debt-ceiling standoff in 2011 is costing taxpayers nearly $20 billion as nervous investors demanded higher interest on U.S. Treasury bonds to defray the risk of government default. He termed it as 'manufactured political crisis' which caused economic uncertainty to spike, consumer confidence to plummet and stock prices to spiral downward — all because of the perceived risk of the United States defaulting on its domestic and international obligations. Unfortunately, Congress seems poised to undermine U.S. credibility at home and abroad by taking the extraordinary step of reneging on bills that our nation has racked up. "If our nation defaults on its nearly $17 trillion in debt, the harm is likely to be measured in hundreds of billions of dollars", he added. His conclusion is : "If confidence is lost in our country’s willingness to pay its bills on time, we will have lost something that may be impossible to regain — the world’s trust".

Jacob J. Lew
Treasury Secretary
Jacob J. Lew, the US Treasury Secretary, in a letter (dated September 25, 2013) to the Speaker John A. Boehner has conveyed : "Treasury now estimates that extraordinary measures will be exhausted no later than October 17. We estimate that, at that point, Treasury would have only approximately $30 billion to meet our country's commitments. This amount would be far short of net expenditures on certain days, which can be as high as $60 billion. If we have insufficient cash on hand, it would be impossible for the United States of America to meet all of its obligations for the first time in our history".

The letter also says : "The debt limit impasse that took place in 2011 caused significant harm to the economy and a downgrade to the credit rating of the United States. The drawn-out dispute caused business uncertainty to increase, consumer confidence to drop, and financial markets to fall. If Congress were to repeat that brinksmanship in 2013, it could inflict even greater harm on the economy. And if the government should ultimately become unable to pay all of its bills, the results could be catastrophic.

The President remains willing to negotiate over the future direction of fiscal policy, but he will not negotiate over whether the United States will pay its bills for past commitments. Extending borrowing authority does not increase government spending; it simply allows the Treasury to pay for expenditures Congress has already approved. As such, I respectfully urge Congress to act immediately to meet its responsibility by extending the nation's borrowing authority.

An analysis carried out by the Bipartisan Policy Center (BPC) has also warned that the federal government will be unable to meet all of its spending obligations as early as mid-October, unless the debt ceiling is raised. BPC estimates that the federal government will exhaust its borrowing authority and no longer have sufficient funds to pay all of its bills in full and on time at some point between October 18 and November 5, 2013.

Both - the Treasury Department and Bipartisan Policy Center - believe that the debt limit X Date is most likely to occur between October 18 and November 5. The debt limit X Date – the day upon which the U.S. government would no longer be able to meet all of its financial obligations in full and on time – if policymakers do not take action. 

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