Unless you have been busy following the death of Amy Winehouse, the fallout from the Caylee verdict, or News Corp.'s blowback from the News of the World phone hacking scandal, you might have noticed that there is bit of a financial debate going on in Washington, these days.
The current debt ceiling talks that have consumed Washington and a good chunk of mainstream media coverage for some time now, continue apace, and will not stop until 11:59 pm on August 1, most likely. At stake, of course, is the United States' ability to pay bondholders and other debts unless it allows itself to borrow more money before August 2, when certain debts come due that the government simply does not have the money to pay. As the BBC points out, raising the debt ceiling is something our government has done many times before without a fuss, only now staunch resistance from the GOP has turned this process into a political flashpoint.
It is not hard to see how this has all come about, as attacking the debt ceiling is a roundabout way of trying to apply the Congressional de-funding strategy to things like health care reform and financial services reform, a strategy the GOP has long considered as a fallback option once it became clear that the Republicans did not have the political strength to block either regulatory package. The popular selling point is that President Omama and the Democrats have been on a wild spending spree and must be stopped before they bankrupt the country. When one looks at the current federal budget, however, it might be tempting to point out that the same argument could have been applied to the dramatic military spending we have seen over the last 10 years.
But that is also a bit like comparing apples to oranges. The point is, the United States can live with a debt ceiling increase; the question to resolve is whether it really wants to or not. If it does, then life goes on under an even heavier debt load. But if it does not, then it will default, and that carries with it some pretty serious economic reverberations that will further complicate an already difficult recovery from our long recession. (Anyone who doubts it can take a look at Wall Street's jitters over the prospects of a default.)
This matters to the life and health world on two fronts. The first, and less important, front is that a defaulted government and the havoc it would play with our economy would doubtlessly impact sales for the L&H industry. Low retirement planning and individual life sales in particular have been blamed in part on a poor economy. As people must prioritize their finances, things like extra insurance tends to get short shrift, and understandably so. People are still under-insuring themselves, which is most unwise, but when it comes down to making a mortgage payment or keeping a life policy in force, folks are probably going to go with the mortgage payment. And while life sales have begun to show signs of recovery (and annuity sales are going great guns), a default could possibly put the brakes on all of that, which is not what the L&H industry really needs right now.
