Watching the news, I learned a key fact about U.S. government finances which may not bode well for our local economy if the federal debt ceiling is not raised. Here it is.
Of every dollar the federal government must spend to meet all its obligations, about 60 cents comes from revenues collected in taxes, fees and the like. The last 40 cents are borrowed by issuing bonds, which comprise all our national debt. Now, what happens if the federal debt ceiling remains frozen?
If that happens, government cannot issue bonds to borrow any more, so 40 percent of its revenues, the borrowed portion, vanishes. The government must meet all its obligations with only the remaining 60 percent. It must pay its accrued debt obligations, finance two wars, Social Security, Medicare, Medicaid, veterans benefits, pensions and all its operations with only this 60 percent.
That will be impossible, forcing extremely hard choices. Pay debt obligations or domestic obligations? Which domestic obligations will be honored and which ones will not? The government will identify its critical operations, which must be supported always, and its non-critical operations, which can be shut down to conserve revenues. This is what happens when budget stalemates shut down government. Now, what non-critical operations could be shut down locally?
Mesa Verde National Park — closed. San Juan National Forest — closed. Canyons of the Ancients National Monument — closed. Anasazi Heritage Center — closed. With all our prize tourist attractions closed, tourists will simply pass us by, so our local tourist economy is gone. Many local federal workers will be furloughed as well, so their nonexistent paychecks will circulate in our local economy no longer.
Also, the federal government compensates Montezuma County for lost tax revenues the county cannot impose on federal land. This is called payment in lieu of taxes, known by the acronym PILT. That could be deemed a non-critical obligation, so what happens to the county budget if the government suspends its PILT payments? How will the county meet its own obligations?
Now you can realize that a frozen debt ceiling will not be just some distant Washington problem. Our local economy will be devastated. And this will happen all over the country, state-by-state, county-by-county, city-by-city. How do you local conservatives, Republicans and business owners feel about debt ceiling freezes now?
Republicans in Washington alone, including our Representative Scott Tipton, started this fight by refusing to raise the debt ceiling until Democrats and President Obama capitulate to all their budget cuts. They are bullies, holding hostage the financial integrity of the United States. Democrats never threatened such a dangerous, irresponsible, harmful act.
This Republican cure is worse than the disease. If you think our ballooning national debt is creating too many problems, just think how many even more severe problems will be created locally, statewide, nationally and worldwide, if we choose to default deliberately on our national debt?
Republicans alone created this fiasco. They could have chosen to negotiate in good faith instead of creating such growing uncertainty and instability in national and world financial markets. In the 2012 election, Representative Scott Tipton will have to explain to all of us why he was ready and willing to damage his own congressional district so badly.
James F. Andrus is a resident of Cortez. He provides weather reporting for the Cortez Journal.
