The fight over whether to raise the federal debt ceiling, which promises to consume a lot of political oxygen over the next several weeks, is a ruse.
Neither party is serious about what must really be done to put the nation’s fiscal house in order.
The debt ceiling must be raised to allow the government to pay debts it has already incurred. And the not-so-hidden secret in Washington is that both major parties are responsible for a rise in excess spending that has increased the national debt nearly sixfold since the start of the 21st century.
At this point in 2000, the debt was slowly approaching $6 trillion. Today, it has raced to the debt ceiling limit of $31.4 trillion, which has prompted the current crisis.
Democrats may have a proclivity toward raising taxes, often pushing the false notion that the rich could largely fund extravagant programs if forced to pay their “fair share.” Republicans, at least when they don’t control both chambers of Congress, tend to talk about tax cuts and budget reductions. But neither side has yet to get serious about what really needs to happen — a combination of cuts and targeted tax hikes, and a restructuring of Social Security and Medicare, programs that continue to grow unchecked.
More than a decade ago, a commission chaired by former Wyoming Sen. Alan Simpson, a Republican, and former Clinton chief of staff Erskine Bowles, a Democrat, made a good-faith effort at reining in the nation’s budget problems. They wrote a plan that would have distributed economic pain evenly and judiciously.
Utah’s senators have been vocal about the problem. Sen. Mitt Romney used the example of collapsed economies around the world and warned of catastrophe during a budget hearing last year. “The President’s budget still borrows a tremendous amount of money and does nothing to address the two-thirds of our federal spending that is automatic,” he said in a statement about President Joe Biden’s budget proposal.
Sen. Mike Lee introduced a bill last year that would have required a 3/5 majority of the Senate to approve any new spending bill when the inflation rate is higher than 3%. He has correctly identified runaway federal spending as a principle cause of inflation.
In the Simpson-Bowles plan, Social Security’s retirement age would have jumped to 69, for the youngest workers, while making sure the wealthiest retirees received fewer benefits than everyone else. Defense spending and farm subsidies would have been cut, while the gas tax would have gone up and tax deductions would have largely gone away.
Government spending would have been capped at 21% of GDP, and all government agencies would have been forced to cut discretionary spending to 2008 levels, after accounting for inflation. Current spending is about 25% of GDP, according to the Treasury. For every $1 raised in taxes, $2 to $3 would have been cut from the budget.
In the end, Simpson-Bowles did not receive enough support from commission members to bring the plan to a vote in Congress. President Barack Obama also did not endorse it.
But that’s not a commentary on Obama or Democrats, alone. A Republican president likely would have done the same thing because it’s politically difficult to both raise revenues and cut spending enough to make a difference.
The New York Times this week looked at federal debt during the 21st century and concluded both parties were roughly equally to blame. Wars in Afghanistan, Iraq and Syria were costly. Tax cuts enacted by Presidents George W. Bush and Donald Trump, without corresponding budget cuts, further ballooned the debt.
And massive multitrillion-dollar stimulus programs — to counter the COVID-19 pandemic, under Trump and Biden, and to counter the after-effects of the 2008 recession, under Obama — sent it spiraling upward.
The Times said “one crude measure” of this spending found the debt grew by $12.7 trillion under Republican presidents this century, and $13 trillion under Democrats.
The Simpson-Bowles plan is now outdated. For one thing, raising the federal gas tax would do little in this age when gas taxes are beginning to show diminishing returns. For another, military cuts make little sense when Russia and China are beginning to act belligerently.
But the concept — restructuring entitlements and increasing revenues while decreasing spending — is the only template that would work.
The nation needs a new Simpson-Bowles approach. Romney has been working on such a proposal, known as the Trust Act. It would establish separate bipartisan “rescue committees” for trust funds, including the Highway Trust Fund, Medicare Part A, and the Social Security trust funds. The Act has several Democratic co-sponsors and has received bipartisan support in the past. The senator is expected to reintroduce it again this year.
Co-sponsor Sen. Joe Manchin, D-West Virginia, was quoted recently endorsing the Act by The Hill, adding, “I think what we have to do is realize that we have a problem. We have a debt problem. We have $31.4 trillion of public debt right now.”
Simpson and Bowles also endorsed the Act, warning in a joint statement, “The Social Security, Medicare, and Highway Trust Funds are all predicted to be insolvent in the next 11 years, triggering deep, across-the-board cuts in benefits.”
Indeed, a burgeoning federal debt could be a threat to national security. At some point, it would hamper the nation’s ability to respond to military needs.
It is a threat to economic security, as well. At some point, the government will no longer have the means to effectively respond to economic downturns, while excess government spending could rob the private sector of the capital needed to prosper.
When the Federal Reserve raised interest rates to counter inflation, it also raised the interest the government must pay on its debt. Borrowing has been cheap for many years because of low rates. Now, the cost is rising.
The Congressional Budget Office, in its 2022 report, said if nothing changes, by 2032 “federal debt would be higher as a percentage of GDP than at any point in the nation’s history — and heading still higher in the following two decades.”
Yes, Republicans are right when they say spending should be cut, but they are wrong to think those cuts could be anything less than painful and serious and accompanied by revenue increases. If Congress adopts Romney’s plan, and if the rescue committees are serious, their recommendations no doubt would lead to some difficult political decisions — but these are decisions the nation must confront sooner or later.
But Republicans are wrong to think that not paying current obligations, by raising a debt ceiling they helped reach, would be a noble maneuver.
Real fiscal responsibility must be a bipartisan effort by lawmakers who feel chastened by their own parties’ culpabilities.
(Note: This piece has been updated to include information about the Trust Act.)