Washington has no shortage of fiscal disasters to grapple with. Raising the debt ceiling shouldn’t be one of them.
No member of Congress, of either party, looks forward to going on the record to support an increase in the amount of money the U.S. government can borrow — and therefore spend. That’s why these debt-ceiling votes have become such irresistible political targets.
Now President Barack Obama, adopting a proposal first made last year by Senate Minority Leader Mitch McConnell, has offered a way for members of Congress to make their political point — without harming the markets, the economy, or the full faith and credit of the United States. If Republican members would drop their resistance, Congress and the White House could move on with the more important task of getting the federal government’s budget deficit under control.
Recent estimates project that the United States will hit its $16.4 trillion debt limit in the last week of December, and will be able to muddle through until February by delaying certain payments and shifting money among various government accounts. Republicans are saying they won’t approve an increase in the debt limit without spending cuts in exchange.
It’s time to end this congressional chokehold, which is not merely symbolic of Washington dysfunction but has real consequences. The U.S. will have $18.9 billion in higher interest payments over the next decade as a result of last year’s gamesmanship. The threat of U.S. default makes investors nervous, harms the economy and weakens the nation’s hand in its dealings with other countries.
Obama’s sensible plan would give the White House more power over the debt ceiling so the U.S. can avoid this sideshow. Under his proposal, the president would be required to notify Congress when the U.S. is within reach of its borrowing limit and request an increase. Congress could then register its objection by passing a resolution to reject the increase — and the president could then veto it, allowing the U.S. to borrow more money.
Although it’s modeled on a proposal McConnell made during last year’s debt-ceiling hijinks, Republicans now oppose the idea. McConnell called Obama’s idea “a power grab” and vowed to keep control of the “federal credit card” limit with Congress.
Memo to McConnell and his fellow Republicans: You already have that power. The debt limit is simply the mechanism by which the U.S. borrows money to pay for existing commitments. Because the U.S. runs a budget deficit, the Treasury Department must borrow money to finance all sorts of things Congress has previously authorized — from interest payments to national defense to Social Security checks to government salaries.
To extend McConnell’s analogy: Republicans (and more than a few Democrats) may think that the government is putting too much on its credit card. That’s a different argument. To reduce its debt, the federal government has to stop putting so much stuff on its card in the first place. It can’t just say it’s going to stop paying for what it has already bought, which is what rejecting a debt-limit increase would amount to.
There are legitimate reasons to want to reduce how much money the U.S. borrows. The nation’s debt load is already at about 73 percent of gross domestic product — its highest level since 1950 — and is projected to grow to 93 percent by 2022 absent any serious deficit reduction efforts, according to the Congressional Budget Office. That level would be calamitous for the U.S. economy, leading to reduced saving, higher interest rates, lower income growth and more borrowing from abroad.
Averting this scenario will require the U.S. to reduce its budget deficit through a combination of less spending and more revenue. Washington is already trying to deal with those challenges — albeit in a tortured fashion — as it works to prevent more than $600 billion in spending cuts and tax increases from going into effect next year. Those negotiations are the appropriate forum for dealing with the unsustainable fiscal situation.
Congress has enough to fight about. Taking the debt-limit authority out of its hands would allow lawmakers to concentrate on fixing the nation’s fiscal woes and force them to find legitimate ways to curb spending.
Bloomberg View (Dec. 10)