Debt limit debate matters to Indian Country

Sometimes it’s easy for Indian Country to ignore the huge challenges facing the United States. After all, there are so many immediate and intense issues on reservations and in tribal communities that the idea of adding another layer of concerns just seems too much.

But there is a connection.  The current federal policy of contraction -- spending less on government programs and people -- will have huge implications for Indian Country in the years ahead.

The debate to increase the federal debt limit, the amount of money the United States is authorized by law to borrow, is a good example. Some Republicans have vowed to oppose a debt limit increase unless federal budget cutting ramps up significantly. If that happens, money will be cut from all federal programs, including those that benefit Indian Country.

“The debt limit will be reached as early as March 31, 2011, and most likely sometime between that date and May 16, 2011,” Treasury Secretary Timothy Geithner said in a January letter to Senate and House leaders. Geithner warned Congress of “catastrophic economic consequences” if the limit is not increased.

Consider the way the federal government pays for its deficits: It sells bonds at auction. Governments (such as China), institutions and people buy those bonds and receive interest payments in exchange. Right now the U.S. is getting a super deal on its loans, paying roughly 4.5 percent on 30-year notes. But if interest rates go up, so does that cost. In fact: This is a government program that’s already on automatic pilot because the U.S. has no choice but to pay the going rate at auction.

We just finished a brutal fight over cutting $100 billion from government spending. Imagine all of those cuts now being wiped out in a split-second because interest rates are ticking up. Last year the U.S. Treasury paid $413 billion in interest. To show the scale of that number, one percent of that is roughly what is spent for Indian health care programs.

What this means is that both political parties are promising to spend less and pay back that debt. There is no longer a debate about cutting -- only differences about what to trim, how fast and what the impacts will be. Sooner or later there will be second debate about “revenue” or how much and how to tax.

Alice Rivlin, a senior fellow at the Brookings Institution, recently told the Christian Science Monitor, “At some point – and it seems likely to be very soon – our creditors will begin to worry that we're not credit-worthy, they will demand a higher price, and interest rates will go up.”

And every dollar spent on interest is a dollar that cannot be spent on health care or any other government enterprise. It’s money that is paid to “investors” as profits. I’d prefer government help people.