What the Obama team says it wants this time is a “clean” raise—a hike in the debt ceiling that’s paired with no significant changes. In other words, the president wants to continue the same old routine: raise the debt limit, spend more, borrow more—wash, rinse, repeat.
The White House argues that a clean hike is the only way to avoid a potential downgrade of the nation’s creditworthiness. If the GOP resists authorizing a hike in the limit, political instability will make creditors wary of further lending, raising the nation’s borrowing costs and destabilizing the global economic system.
Perhaps they should pay a little more attention to what the big credit rating agencies are actually saying. Earlier this week, Fitch put the U.S. government on notice: Yes, it wants the debt limit raised without a major fight, but it also warned that the fundamental strengths of the country’s creditworthiness “are being eroded by the large, albeit steadily declining, structural budget deficit and high and rising public debt.” Without a credible medium term deficit reduction plan, the agency says, a downgrade of the U.S. credit rating is likely by the end of this year. Fitch isn’t the only agency to sound this alarm about unsustainably high debt levels. As The Wall Street Journal noted this week, all three rating firms “have implored lawmakers to lower the country's debt relative to its economic output.”