As state treasurer, it is my job to invest Missouris $3.6 billion portfolio. I am constitutionally required to deposit state funds in safe investments, including U.S. Treasury bonds. This is widely considered a sound investment strategy, one utilized by states, local governments and major corporations. However, the current political debacle in Washington, D.C., is putting this sound investment strategy at risk and threatening to cause an unprecedented economic crisis.
By CLINT ZWEIFEL
Special to The Star
In May, the U.S. government reached the statutory debt ceiling, meaning it cannot borrow money to pay existing financial obligations without further congressional approval. In response, the U.S. Treasury Department instituted emergency measures to continue meeting our nations financial obligations while waiting for a vote to raise the debt ceiling. The debt ceiling was raised without controversy 18 times under President Ronald Reagan, nine times under President George H.W. Bush, six times under President Bill Clinton and seven times under President George W. Bush; however, this Congress has refused to act and now time is running out. By the end of October, experts believe the federal governments daily obligations will exceed its revenue, leaving it unable to fulfill its financial commitments. Our government would default for the first time in history.
There are a number of scenarios that may occur, but a few things are certain.
The U.S. government plays a major role in global financial markets. The impact of default will be felt from stock markets in Japan to grocery stores in Joplin. Interest rates will likely rise, meaning loans would cost more private student loans, home loans and business loans. Credit markets could freeze and the value of the dollar could fall drastically. In fact, the U.S. Treasury secretary says failing to raise the debt ceiling could cause a greater economic calamity than the Great Recession of 2008.
The federal government is responsible for funding programs upon which millions of Missourians and Americans rely. Every program that depends on federal funding would be in jeopardy. This means individuals who depend on a Social Security check to pay their bills could receive their checks days or even weeks late. Medicare, free and reduced-price school lunches and veterans hospitals could face long funding delays and difficult choices. States would be forced to accept the shutdown of these programs or find funds to fill the gaps. This is especially relevant to Missouri, as more than 33 percent of our $24.8 billion budget comes from the federal government.
The real fiscal challenges for our country will not disappear after this politically engineered crisis is over. Americas ability to protect its citizens and lead on the world stage demands a real, long-term deficit-reduction strategy which will require decreases in long-term government spending. Elected officeholders owe their constituents and our future generations more than a continuing resolution. It is time to create a budget and a debt strategy that truly moves this country forward.
Congressional leaders need to do what we elected them to do serve our country. Regardless of what size you think government should be, everyone agrees that government should function. Everyone agrees that America honors its commitments, supports vital programs and protects our citizens. President Reagan was fond of referring to the United States as a shining city upon a hill. Our nation has been that shining city for over 200 years. If Congress refuses to lead, can this continue?
There are tough decisions ahead. These decisions will require leadership, pragmatism and cooperation. We cannot continue to lurch from crisis to crisis. We need long-term solutions built from negotiation between equals, not from panicked bargaining to avoid economic collapse. Missourians, Americans and the international community are watching.
Clint Zweifel, a Democrat, is serving his second term as Missouri treasurer.