Stop the Debt Ceiling Nonsense
In finally reaching an agreement this week to raise the federal debt ceiling, ensuring that the United States can pay its bills for the next few months, the members of the U.S. Senate have performed a public service roughly akin to that of a would-be arsonist who pockets the matchbook and walks away from the straw.
In 2019, the last time Congress played with fire before finally raising the ceiling, this board wrote that “anything short of eliminating the ceiling is legislative malpractice at public expense.” These past few weeks of completely unnecessary brinkmanship have only served to strengthen that judgment.
Policymaking in the United States has been reduced to grappling with whatever crisis looms largest. On questions of public spending, as in other areas, like public health, the nation’s leaders seem to have lost the ability to make the kinds of decisions necessary to avert future crises. The deal reached this week doesn’t resolve anything.
The ceiling, created in 1917 to streamline federal borrowing, has not served a useful purpose in living memory. It endures only as a dangerous impediment to the necessary function of the federal government. Those who defend the debt ceiling as a check on federal spending misunderstand its mechanics.
The ceiling is a limit on federal borrowing, much like the limit on a credit card. The government only borrows to provide for spending previously authorized by Congress, or to pay the interest on outstanding debts.
Congress has already voted to spend this money. The only choices at this point are raising the debt limit so that the necessary money can be borrowed, or breaking promises.
Failing to raise the debt ceiling would amount to taking a hammer to the foundations of the global financial system, which rests on the absolute confidence of investors that the United States will always repay its debts.
Even a glimmer of risk is enough to upset markets. Another recent debt ceiling standoff, in 2011, cost American taxpayers about $1.3 billion as investors demanded higher rates on federal debt. That in turn drove up other interest rates, including on home and auto loans.
Janet Yellen, the Treasury secretary, said last month that it is “very destructive” for Congress to authorize spending and then separately debate whether to pay the bills it has already incurred. Congress could, and should, pass a common-sense law replacing the ceiling with a law that says the government can borrow whatever is necessary to provide for the spending authorized by Congress.
Instead, both political parties continue to behave badly, albeit in different ways.
Senate Republicans are quite simply engaged in economic sabotage. Under Democratic presidents, they routinely obstruct the process of raising the debt ceiling for no apparent purpose other than fear mongering.
They also misrepresent the nature of the ceiling, perhaps because it would otherwise be untenable to defend their behavior.
Senator John Cornyn on Wednesday rebutted an accurate description of the proposed increase as necessary to pay for spending commitments the federal government already has made. “No,” Mr. Cornyn wrote on Twitter. “Otherwise we would have already exceeded the debt limit. This is for future spending.” Just so, Mr. Cornyn: future spending on commitments the government already has made.
Democrats, by contrast, are guilty of cowardice. They are ready to raise the ceiling, but most are not willing to get rid of it. The White House has pointedly refused to endorse Ms. Yellen’s views. A few Senate Democrats have taken public stands, but not enough to avoid a repeat of this sad circus when the United States approaches the new debt ceiling in the coming months.
One justification quietly expressed by Democrats is the fear that if they voted to eliminate the debt ceiling, Republicans would portray them as fiscally irresponsible. Yet to avoid that risk, they are being fiscally irresponsible.
The government in recent decades has increased borrowing to cover a growing gap between tax revenue and spending. The national debt now tops $22 trillion, equal to roughly 98 percent of the nation’s annual economic output, although interest costs remain low.
The size of the federal debt is a legitimate subject for public debate.
But the debt ceiling is not a useful mechanism for preventing the federal government from living beyond its means, because it does not stop Congress from incurring new obligations.
It is not a meaningful measure of the nation’s fiscal health. It is set in dollar terms, and it must be increased even if the federal debt is not rising as a share of the nation’s economic output.
Debt ceiling votes should not be treated as an appeals process for the losing side in fights about federal spending, as in 2011, when congressional Republicans refused to raise the debt ceiling until the Obama administration accepted caps on spending growth.
Democrats could eliminate the ceiling without Republican support by getting rid of the filibuster, or by limiting its use. The resistance of some Democrats, notably Senator Joe Manchin of West Virginia, amounts to preventing the end of one harmful institution for the sake of preserving another harmful institution.
Senate Democrats also could prevent a filibuster by using the existing process known as reconciliation to raise the debt ceiling to a height that would render it purely decorative. Denmark, the only other democracy with a comparable ceiling, has chosen this path, setting its ceiling far above its actual debts.
The best thing about the deal reached this week is that it gives Democrats a few months to come to their senses. Senators can decide for themselves whether serial brinkmanship is good politics. What ought to be perfectly clear is that it’s bad for the country."