Steven J. Richardson
Connect with me
Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.
Hey, I'm a bankruptcy attorney, not an economist, but all this talk of the impasse in Washington over raising the debt ceiling by August 2 has me a bit worried and confused.  I do understand that the Republicans are trying to reduce the size of government by reducing spending, which, supposedly, will reduce taxes, and that the Democrats are trying to preserve essential services and entitlements, especially to those who are most needy.  But unless I'm missing something, won't not raising the debt ceiling actually raise our taxes, if not immediately, but down the road?

As I said, I am a bankruptcy attorney.  I see my clients default on their debt all the time and have their interest rates go to 29.99%, while their credit scores go way down.  Those with lower credit scores  then pay more for money on loans because of the higher interest rate they are charged.  That said, what happens when a country defaults on its debt?  Even if there aren't immediate consequences because our loans may not have default interest rates like credit cards, there may well be down the road when (not if) we have to borrow money again.   Plus, inability to make a payment on a loan leads to unpaid interest mounting up, thus increasing the debt and increasing the payments to bring it back down again. Increased payments must in turn lead either to increased income to pay them (higher taxes) or reduced spending (even deeper budget cuts).

So, am I missing something here or could not raising the debt ceiling actually raise our taxes?  I am sure there is some macro- (or is it micro-) economic point I am overlooking, or perhaps I am oversimplifying things.  Just trying to apply some common sense and 20 years as a bankruptcy attorney.  What are your thoughts?  Is not raising it as bad as everyone is saying or is it just political posturing by some politicians in order to allow them to spend more money?  Leave your comments below and let me know!
Be the first to comment!
Post a Comment