Opinion: Debt ceiling is the wrong place to fight for fiscal responsibility
Raising the ceiling merely allows the U.S. to pay for debts it already has incurred. Reining in over-spending requires battles over actual spending.
Here we go again.
Americans haven’t had to endure the brinkmanship of a debt ceiling vote in years. That’s because, when Donald Trump was president and both parties spent with abandon, Congress and the president agreed to suspend the debt ceiling for two years, ending on July 31 of this year.
Now, the ceiling suddenly is a political issue again.
With Joe Biden in the White House and both a $1 trillion compromise infrastructure bill and a $3.5 trillion Democratic-backed spending package on the table, Republican lawmakers again are reviving the ceiling as a potential political billy club. Senate Republican Leader Mitch McConnell and other party leaders say they won’t vote to raise it, especially if Democrats seek another suspension of the ceiling through 2022 using a continuing resolution.
But this weapon is too dangerous to wield, simply because the consequences of the nation defaulting on its debts are awful to contemplate.
Also, this is the wrong fight. The time to stand against debt is when spending bills are passed. The way to successfully combat debt is through consistent, principled and credible actions, and by letting voters know what is at stake, not by ignoring the ceiling when your party controls the White House, then changing positions when the other party takes control.
The United States has too much debt. That ought to be obvious to any American concerned with fiscal responsibility. The national debt is $28.7 trillion and rising quickly. No one knows when it will begin to erode worldwide confidence in the dollar or when interest payments on the debt will begin to harm economic growth. But a limit exists somewhere.
While the debt ceiling is a convenient high-profile symbol of that debt, and while it offers lawmakers the only chance to vote solely on the concept of the rising debt, the truth is the ceiling itself represents the nation’s resolve to cover debts it already has incurred. Voting against it would be like telling the bank not to expand your credit limit when you already have overspent.
This ought to be considered separate from the large spending bills up for consideration — bills that will require greater spending limits in the future.
No one knows exactly what would happen if the nation ever ran out of the money needed to pay its obligations. Economists generally believe the result would be, at least, a serious recession.
Writing in The Wall Street Journal this week, Treasury Secretary Janet Yellen outlined such a scenario. Senior citizens would stop receiving Social Security checks. Families relying on child tax credits would see those benefits delayed. Soldiers would stop getting paid.
Perhaps more importantly, such a move would hurt global confidence in the U.S. Despite dithering over the debt ceiling 80 times since 1960, according to Yellen’s reckoning, the nation never has defaulted. It would take only one time to destroy that record, and the result could be the need to offer a higher rate of return on Treasury securities in order to satisfy investors. That would result in higher interest rates for everything from car loans to mortgages to credit cards.
On the one hand, that’s a threat that could force a compromise over spending bills the nation can’t afford. On the other hand, threatening the nation with ruin sounds worse than acquiring more debt.
Funding for government operations is expected to run out on Oct. 1. We hope America’s representatives can solve this issue well before then.