John Perilli: Down With the Debt Ceiling
Wednesday, February 12, 2014
You would think, with all its prestige and resources, Congress would have better ways to run the country. But this is shockingly similar to how our elected officials determine something called the "Debt Ceiling," which is an arbitrary limit set on how much money the United States can borrow to pay its bills.
This might sound appetizing if you're the type of person who wants to cut the Federal Government's spending at all costs. What better way than a hard limit to keep the money in check?
But therein lies the problem: there's no way around a hard limit. If the United States hits the ceiling and can't borrow anymore, we enter default. And not just the-bank-possesses-our-belongings sort of default: the kind of default that could cause the world financial market to come crashing down again, possibly even harder than it did in 2008 and 2009. This is a bad deal no matter where you fall on the political spectrum.
Yet this is exactly the kind of fate our Congress has tempted, occasion after occasion. Now, for the second time in five months, battle lines are being drawn in the U.S. Capitol over raising our debt ceiling for another fleeting few months. Republicans think they can extract concessions by holding our credit hostage, while Democrats try to score political points by demanding it be raised.
Let's just end all this noise, and abolish the debt ceiling altogether.
A Shell of Its Former Self
Back in 1917, when our first debt ceiling laws were first established, the U.S. was in desperate need of war money. The debt ceiling allowed for the U.S. Treasury, rather than Congress, to borrow money as long as it remained under the limit, ensuring that we could finance the war effort in a timely fashion.
For decades after the war, raising the debt ceiling was relatively uncontroversial. Were we approaching the limit? No issue. Congress would simply approve an increase. Even in the starve-the-beast heydays of Ronald Reagan and George H. W. Bush, raising the debt limit was a suspense-free exercise.
Then in 1995, the issue changed. A cunning Republican Speaker of the House named Newt Gingrich threatened to not raise the debt ceiling if President Clinton did not approve a series of deep spending cuts. Long story short: the government shut down, Republican poll numbers plummeted, and Gingrich relented. The debt ceiling issue entered a fitful 15-year sleep.
However, in 2011, Ohio Republican John Boehner became Speaker, and made the debt ceiling the linchpin of his strategy to extract painful concessions from President Obama and the Democrats. On no less than three occasions since then, the very credit of our country has been threatened in the pursuit of political ends.
See the trajectory of this story? The debt ceiling has gone from a useful tool which helped us win a war to a dangerous political football, one where a dropped pass could not only take us down, but the rest of the world as well.
The obvious solution? Eliminate the thing.
Procedurally, getting rid of the debt ceiling would be easy. The House and Senate would each vote, then President Obama would sign it. And that would be that. No more risk of default. No more potential financial catastrophe. Simple.
The Tough Sell
That being said, though, there are plenty of political cobwebs that haven't been brushed away just because it makes sense to do so. Gerrymandering. Age-old voting machines. The straight-ticket ballot.
The takeaway is this: to actually eliminate the debt ceiling, both parties must be convinced that it is in their political interest. This may seem difficult, but it is not totally out of the question.
The first to be convinced are the Democrats, who will be the easiest to persuade. Being a unified party that relies on borrowing to finance some of their favorite projects such as Social Security and Medicare, Democrats in Congress should go for eliminating the debt ceiling as long as their leadership calls for it.
Republicans, though, will be the harder sell. They will be loath to give up one of their greatest points of political leverage, but in the long run, they will be better off for doing so.
Playing the Long Game
Even considering the recent "sequester" and other such cuts, many Republicans still believe that federal spending is out of control. They continue to call for "fiscal responsibility" and for the American welfare state to get cut and cut some more. But they're going about it all wrong.
The short-term tactics Congressional Republicans have been using to achieve these cuts––shutting down the government, holding the debt ceiling hostage––have been deeply unpopular. For example, the Republican-engineered shutdown of the government this past fall sent their poll numbers spiraling downward, and like their spiritual predecessor Newt Gingrich, they eventually capitulated.
Eliminating the debt ceiling would turn the focus to the long game, where both parties could come together without threat of default and negotiate the long-term financial future of the United States. The so-called "Grand Bargain" could be resurrected. This would mutually advantageous for the parties, as Democrats and Republicans could exchange policy victories through bargaining rather than brinksmanship.
And who knows? Congress might have a chance to boost its dismally low approval rating, restoring some semblance of credibility to one of the world's great legislative bodies.
However, if Congress does not act, and the debt ceiling remains in place, there is one last way to abolish it: an executive order from the President.
When President Obama was sworn in, he took an oath to defend and uphold the Constitution. This includes one particular clause of the Fourteenth Amendment which runs:
Section 4: The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.
This is a stark statement: The Constitution itself protects the money the United States borrows. And if the President is to act as an agent of that great document, he must protect our debt as well. Many legal scholars and economists agree, including former U.S. Treasury Secretary Tim Geithner. To uphold his oath, President Obama should issue an executive order unilaterally striking down the debt ceiling.
Congressional Republicans have brought us close enough to the brink for there to be a credible threat to our public debt. And President Obama himself repeatedly emphasized during his recent State of the Union address that he is willing to act where Congress does not. So why not take this chance? Why not be bold? He would almost certainly be taken to court over it, but regardless of the outcome, the stroke would almost certainly boost his slumping approval ratings, and put Democrats in a better position to gain seats in the 2014 midterm elections.
No matter how it is done, though, we must rid ourselves of the arbitrary, self-inflicted curse that is the debt ceiling. It's a relic from another age, brought back only to torment us. And it's time we move on as a country and put it to rest.
Related Slideshow: New England States With the Most State Debt
In their 4th annual State Debt Study, State Budget Solutions has revealed that state governments face a combined $5.1 trillion in debt.
See how the New England states fared in the slides below:
- John Perilli: Bipartisanship Is Ugly
- John Perilli: Of Ducks, Debates and Dehumanization
- John Perilli: The Recovery Ain’t Over ‘Till It’s Over