We can't afford another debt ceiling crisis
Off we go again.
The fiscal cliff deal fell short of a “grand bargain” on the budget deficit.
This left us to exhale for a brief moment and retool for the next game of chicken on Capitol Hill.
Another debt ceiling crisis looms this winter, and it could prove far more damaging to our savings and financial security.
This standoff is an example of the game theory economists use to understand behavior of players in unpredictable situations — essentially, the rationale behind a game of chicken.
Republicans say they won't allow the federal government to borrow any more money if President Obama and the Democrats don't agree to significant spending cuts, particularly in entitlement programs such as Social Security and Medicare.
Without the ability to borrow more money, Washington would be unable to pay its bills sometime this spring.
Almost everyone agrees the government can't keep spending more than it collects in taxes, even if there's a huge partisan divide on how to achieve that.
But Republicans shouldn't be allowed to push their agenda by recklessly endangering the government's ability to borrow and potentially defaulting on our debt.
This is extortion, and the president needs to stay true to his vow and not negotiate with those prepared to hold America hostage.
Our country must do whatever it takes to make good on the obligations that Congress has incurred in the past. We can’t have buyer’s remorse.
And let's be clear: Many of those obligations were incurred when Republicans controlled the House, the Senate and the White House.
Prior to 2011, Congress understood its duty, and debt ceilings were raised without much fuss.
But when the debt ceiling needed to be raised that summer, Republicans took this confrontational strategy out for a test-spin.
By the time they relented, the markets had tanked, consumer confidence had crashed and S&P had downgraded its rating on Treasury bonds.
You and I paid a terrible price for this political theater (and the worsening financial crisis in Greece that followed in September).
Go back and look at what happened to your retirement accounts during the third quarter of 2011.
The average balance of the 401(k) plans managed by Fidelity Investments fell from $72,700 to $64,300 in those three months — an 11.5% decline.
We don’t need to go through that again, nor do we need to have the brakes thrown on our economy.
If the debt ceiling isn't raised in a rational manner, then not only will liquidity dry up in the United States and send us back into a recession, it will have global impacts on an already teetering European Union.
And this is just fine with those in the GOP following a lobbyist’s lead. In an interview with Politico, Grover Norquist proposed that the debt ceiling should be raised monthly to control spending.
In other words, Congress should be debating on this monthly above all other issues. That is absurd and irresponsible, yet House Speaker John Boehner has actually suggested he's considering it.
In order to keep the markets, investments and our savings from falling off the precipice, President Obama must be prepared to draw a line in the sand and use his executive power for the good of the country.
We can’t afford another game of chicken.
Jill Beccaris-Pescatore is an assistant professor of economics at Montgomery County Community College in Blue Bell, Pa.