Why Do We Have A Debt Ceiling Anyway?

Following the Tea Party-forced government shutdown and near default, it’s worth considering doing away with the debt ceiling. It serves absolutely no purpose other than providing recalcitrant congressional representatives the opportunity to hold our government hostage in order to “negotiate” their pet issues.

Since the debt ceiling is a measure of money already spent by Congress, it has no real impact on congressional budgeting and government spending.

If we really want to limit government spending, what we need is a spending ceiling based on a percentage of the Gross Domestic Product (GDP) and an absolute deadline for the House, the Senate and the White House to agree on a federal budget. Such a law would force Congress to negotiate the federal budget without threat of our government defaulting on its debts.

It would also be far more sensible than the Teapublican-sponsored balanced budget amendment that could lead to greater dysfunction than we’re already experiencing.

A spending ceiling would allow the budget to increase along with the GDP, and presumably the population, while maintaining fiscal discipline. Moreover, Congress and the White House could be given the flexibility to temporarily override the ceiling in special or extreme circumstances, such as the Great Depression or the Great Recession, as long as there was a commitment to offset the overrides within five years. This would allow the federal government to stimulate the economy for a year or two, or to increase spending in wartime. But, in most years, the political debate would be confined to how the money should be spent. Not the amount of money to be spent.

Such a system might allow citizens to more clearly track their representatives’ priorities. It might also make it difficult for representatives to speak in broad generalities about the budget and force them to address specific programs. And, if properly implemented, it might be easier to tell if a representative favored corporate welfare over human needs; or whether or not a representative was voting in support of special interests versus the interests of his, or her, constituents.

In other words, Congress would be forced to do something unprecedented…create a budget and live with its consequences.

Here We Go Again. Another Debt Crisis!

In 2011, Speaker John Boehner and his GOP cronies nearly sent the US economy into a death spiral by refusing to raise the debt ceiling unless President Obama agreed to severe budget cuts. When the president and other Democrats tried to negotiate a common sense agreement that would not lead to a double dip recession, there was a lengthy stand off. The markets were so shaken that US government bonds were downgraded for the first time in history and large parts of our economy came to a standstill.

The GOP tantrum and resulting hit to our economy was completely unnecessary. President Obama was already in the process of cutting the deficit at a faster rate than any previous president in US history! Indeed, in June, we had a monthly budget surplus for the first time in years. And for the fiscal year ending Sept. 30, the deficit will be the lowest since the financial calamity of 2008 – nearly half the previous year’s deficit.

If President Obama is allowed to continue his policies, we will almost certainly see a full recovery of the US economy and the growth will lead to even less spending and more tax revenue as Middle Americans’ get better jobs and their salaries grow.

But that would expose the fraudulent economic policies of Boehner and his fellow Guardians Of Privilege. And they simply can’t allow that. So, once again, they’re threatening to take our economy hostage. Boehner says that he plans to adhere to the so-called Boehner Rule, demanding one dollar in spending cuts for every dollar increase in the debt ceiling.

This is nothing less than economic suicide for the United States!

The debt ceiling is an arbitrary limit that has no affect on the deficit. It merely limits the Secretary of Treasury’s ability to pay outstanding debts. Failing to raise the debt ceiling in order to pay our debts would turn the US into a nation of deadbeats. It would damage our reputation internationally, and it might well lead to an exodus of investments in US bonds, making it more difficult and costly to fund our national debt; a debt largely created by Republicans.

Even dragging out negotiations over the debt ceiling, as in 2011, will lead to serious consequences. It will make employers and investors nervous enough to hold onto their money. That will lead to a market sell-off and increased unemployment. That, in turn, will lead to increased federal spending and decreased revenues. And that will lead to increased deficits and increased debt…exactly the opposite of what Boehner and his fellow nitwits claim to want!

Similarly, the effect of President Obama agreeing to significant budget cuts on top of those already imposed by sequestration will also severely harm our economy. If you doubt that, just look at what has happened as the result of Europe’s austerity measures.

According to the GAO (Government Accounting Office), the 2011 debt ceiling crisis raised the borrowing costs for the government by $1.3 billion in 2011 and an estimated $18.9 billion over 10 years. And, in case you’ve already forgotten the pain it caused, the debt crisis also caused the Dow Jones Industrial Average to fall 2,000 points in just two months. It damaged our economic recovery. Worse, it cost many people their jobs and negatively affected millions of lives.

By all means, Mr. Boehner, let’s do that again!