Congress will soon have to consider whether or not to increase the debt ceiling.
The debt ceiling is the government’s credit limit, so once it is reached, the government cannot legally borrow any more money. The Treasury can continue to pay the government's bills for a while by “extraordinary measures” -- basically shifting some money around different accounts -- but that can only be done for a little while.
The debt ceiling was created in 1917, not coincidentally when the United States was involved in World War 1 and four years after the creation of the Federal Reserve and the income tax.
The debt ceiling allows the Treasury Department to increase government debt without first seeking congressional approval, as long as it stays below the debt limit. Prior to the creation of the debt ceiling, the Treasury could not issue bonds without first seeking congressional approval.
Whenever Treasury is about to hit the debt ceiling, there arises a cry from the political establishment and the media that Congress must do the responsible thing and raise the debt ceiling.
In 2015, Campaign for Liberty Chairman Ron Paul explained why increasing the debt ceiling is irresponsible:
Any delay in, or opposition to, raising the debt ceiling will inevitably be met with hand-wringing over Congress’ alleged irresponsibility. But the real irresponsible act would be for Congress to raise the debt ceiling.
Cutting up its credit card is the only way to make Congress reduce spending. Anyone who doubts this should listen to the bipartisan whining over how sequestration has so drastically reduced spending that there is literally nothing left to cut. But, according to the Heritage Foundation, sequestration has only reduced spending from $3.6 trillion to $3.5 trillion. Only in DC would a less than one percent spending reduction be considered a draconian cut.
The debt ceiling debate Dr. Paul was referring to resulted in a “suspension” of the debt ceiling, so Treasury could issue unlimited amounts of debt. The ceiling was again suspended in 2019.
Then-Senate Majority Leader Mitch McConnell (R-KY) came up with the idea of suspending the ceiling in 2013 and was behind the suspension in 2019.
In contrast, as Senate Minority Leader, Mitch McConnell has repeatedly said he expects every Senate Republican to oppose raising the debt ceiling, which would help pay for Democrat’s spending spree.
Now, Senator McConnell does have a point about the spending spree, but he never objected to the spending when done under a Republican President and a Republican Congress.
Furthermore, Senator McConnell’s support of the “bipartisan infrastructure framework” means he does not exactly have clean hands when it comes to spending increases.
Hypocrisy on the debt ceiling is a bipartisan phenonium. In 2006, a freshman senator from Illinois named Barrack Obama delivered the following speech in opposition to a debt ceiling increase:
The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government’s reckless fiscal policies. Over the past 5 years, our federal debt has increased by $3.5 trillion to $8.6 trillion. That is ‘‘trillion’’ with a ‘‘T.’’ That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers. And over the next 5 years, between now and 2011, the President’s budget will increase the debt by almost another $3.5 trillion.
Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘‘the buck stops here.’’ Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.
I therefore intend to oppose the effort to increase America’s debt limit.
In 2011, as president, Barrack Obama delivered the following remarks about raising the debt ceiling:
And there’s no reason why we can’t get this done now. We know what the options are out there. This is not a technical problem any longer. This is a matter of Congress going ahead and biting the bullet and making some tough decisions. Because we know what the decisions are. We've identified what spending cuts are possible. We've identified what defense cuts are possible. We've identified what health care cuts are possible. We've identified what loopholes in the tax code can be closed that would also raise revenue. We’ve identified what the options are. And the question now is are we going to step up and get this done.
Democrats have so far refused McConnell's advice that they add a debt ceiling increase to the $3.5 trillion “human infrastructure” bill currently being drafted by the U.S. House and Senate. This bill will be brought up under reconciliation, so it cannot be filibustered by Senate Republicans.
Since no Republican is expected to vote for the bill, attaching a debt ceiling increase to it would allow McConnell to have his cake and eat it too -- he can thunder against raising the debt ceiling knowing it will be increased without him or other Republicans having to vote for it.
The more likely scenario is the debt ceiling increase will be attached to the continuing resolution keeping the government open, thus forcing Republicans to either raise the debt ceiling or “shut down the government.”
After the forced shutdowns of private businesses and jobs over the past year and a half, I’m not sure the federal government will get much sympathy from Main Street this time around.
Sometimes, as occurred in 2011, there will be a real push to tie a debt ceiling increase to spending cuts. Some fiscal conservatives in the House are going to make such a push.
These efforts should be encouraged, as all efforts to cut spending should. However, the only way to implement the kind of spending cuts necessary to avert economic disaster is to cut up Congress' credit card, which is why Campaign for Liberty, following Dr. Paul’s lead, opposes all increases in the debt ceiling.
Tags: Congress, spending, Debt Ceiling, debt