Debt ceiling debate gives Congress opportunity to chart new fiscal course
(Editor's Note: This piece first appeared in the Washington Examiner on July 10, 2017.)
The federal government creates an inflection point every time it hits the debt ceiling.
The decision to raise it, by how much, and for how long, confronts Congress with a turning point at that moment in the nation's politics. Regardless of one's views about the direction Congress should take today, everyone should agree that the nation's present fiscal course is unsustainable.
The upcoming debt debate gives members of Congress, and the people they represent, an opportunity to consider their options and to chart a new course. As part of that debate, members in the House and Senate should leverage the debt ceiling to enact much-needed policy and process reforms.
Not surprisingly, this is easier said than done.
In a budgetary sleight-of-hand, Congress suspended the $18.11 trillion debt ceiling when it was last confronted with the issue in 2015. It may seem like a trivial distinction, but suspending the debt ceiling instead of raising it makes it easier for members of Congress to authorize more debt because it does not require attaching a specific dollar amount to the total that will accumulate because of their vote.
But there are no free lunches. And what the government borrows must eventually be repaid.
The statutory limit was automatically re-imposed on March 15 at a higher level. During the time that it was suspended, Congress added almost $1.7 trillion to the national debt.
Congress will soon be confronted with the same decision. The Congressional Budget Office recently projected that by mid-October the Treasury Department will exhaust its ability to continue borrowing money while keeping the government's total debt below the new statutory limit of $19.8 trillion.
If the debt ceiling is not raised by then, the government will be forced to operate on incoming revenue. This means that it may have to postpone some projects, delay some vendor payments, and suspend some low-priority government programs. Spending cuts or tax increases (or both) would be required to balance the budget over the medium- and long-term if Congress does not permit the federal government to accumulate more debt.
While taking such steps would be disruptive in the near-term, simply raising the debt ceiling without simultaneously enacting fiscal reforms would be worse. Over the past two decades, Republicans and Democrats in Congress have gone on a spending binge and growth in entitlement spending remains unchecked. Deficits and debt have increased to near record levels as a result. And unlike past instances in the nation's history, the nation's current fiscal trajectory is projected to continue in perpetuity.
Yet there is reason to be optimistic in the face of such inaction. Congress can ensure that this moment is not squandered by including any number of reforms in legislation increasing the debt ceiling.
It should be noted that some want to prevent the debt ceiling from being used as leverage. Yet in so doing, they are using it as leverage themselves. Take recent pledges by some Democrats to back a clean debt ceiling hike. Their rationale in doing so is that failure to raise it would cause serious economic harm.
Yet more revealing than what these members would support is what they oppose. In addition to supporting a clean increase, House Minority Leader Nancy Pelosi, D-Calif., also rejects GOP efforts to attach spending cuts and other policy reforms to any increase.
Pelosi's negotiating posture suggests that her support for a clean increase is first and foremost a tactic designed to make it more difficult for fiscal hawks to prevail. The tactic works by delegitimizing efforts to use the debt ceiling as leverage. It casts opposition to a clean increase as irresponsible, regardless of the reason. Successfully defining the debate in this way guarantees that there is only one outcome.
If this were not the case, Pelosi would not be so unequivocal in her opposition. If primarily concerned with the consequences of inaction, she and her allies should acknowledge the current balance of power in Washington and call for Republicans to join them in a good faith effort to identify the reforms needed to secure the votes necessary to raise the debt ceiling.
Such maneuvering is not unusual. It's how legislative bargaining works. Both sides in the current debate should be acting strategically to ensure that their preferred policy outcomes prevail in the upcoming negotiations. How those negotiations are ultimately resolved, and whether one side wins or loses, depends on how well each party plays the game.