Dance of the debt ceiling: Going through it wouldn't be as bad as people think
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It would be fiscally irresponsible to raise the ceiling on the national debt from $8.1 trillion to $8.9 trillion, the junior senator from Illinois said when President George W. Bush wanted to do that in 2006.
Raising the debt limit "is a sign of leadership failure," he said. "Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren."
The national debt has doubled since 2006, but Barack Obama says now it would be fiscally irresponsible not to raise it. For hypocrisy, this can't be topped. But the president isn't the only hypocrite. Nothing has generated as much posturing and grandstanding as the all-too-frequent votes to raise the debt ceiling.
The first overall ceiling on federal debt, imposed in 1939, was $45 billion. The current statutory ceiling, $16.394 trillion, is 360 times higher. This suggests the debt ceiling hasn't been very effective in restraining spending and debt.
Year after year this kabuki dance goes the same way. The president asks Congress to lift the debt ceiling, to pay for all the spending Congress has authorized. Members of the opposition party fulminate against it.
Some big spenders vote no, so they can claim to be "fiscally responsible." But not enough actually to defeat it. Politicians fear the consequences of not raising the debt ceiling more than they have feared the consequences of adding more debt. The news media exaggerate and distort the consequences.
If the debt limit isn't raised, the United States will default on its obligations, we're told. It would be very bad if this were so. But it isn't.
If the debt limit isn't raised, the federal government may spend only as much as it collects in taxes. But the amount the Treasury must spend on debt service is only about 6 percent of federal spending. Tax revenues far exceed that.
The government will be "shut down" if the debt limit isn't raised, the media say. Social Security and Medicare checks won't go out. The troops won't be paid.
These terrible things would happen only if the president chooses to make them happen. Tax revenues through March 15 are estimated to be about $90 billion more than what's needed to pay interest on the debt, military salaries and to send out Social Security and Medicare checks on time.
The government was "shut down" for 25 days in 1995 while President Bill Clinton and House Speaker Newt Gingrich wrangled over spending, to no ill effect to the nation's credit rating, the economy or to recipients of Social Security and Medicare.
Before the Obama administration, the battles over the debt ceiling were more for theater than for real. But now the national debt equals the gross domestic product. Catastrophe looms if trillion-dollar deficits aren't trimmed. So Republicans search for a magic bullet that will force President Obama to reduce spending. The debt ceiling isn't it, according to New York Times columnist Ross Douthat.
Technically, refusing to raise the debt ceiling would keep the debt from rising, he acknowledged, but "that technical solution would be a political disaster, because being perceived as the agents of an avoidable crisis would weaken the Republican Party's standing with the American people in ways that would raise the likelihood of precisely the long-term outcome that congressional Republicans are trying to avoid."
That's pretty much what happened in 1995. The impasse ended when President Clinton agreed to some spending restraints, so Republicans could claim to have won the fiscal battle.
But they lost the political war. GOP obstinacy had triggered a "crisis," people believed. "Clinton used the episode as the springboard for his successful reelection campaign, and he humiliated Republicans for it during his 1996 State of the Union speech," recalled Washington Post reporter Glenn Kessler.
In 1995, the government borrowed less than 15 cents of each dollar it spent, so even if the standoff had lasted much longer, all important obligations could have been met. But now the government is borrowing 40 cents for each dollar it spends. A "shutdown" that lasted for more than a couple of days could cause real hardship, for which Republicans would be blamed.
So what should Republicans do to alert Americans to the dire consequences of our mountain of debt? That discussion must await another column.
First Published January 27, 2013 12:00 am