Sometimes it feels like we swing from one fiscal crisis to the next. Earlier this month it was the fiscal cliff, now it is the debt ceiling, and after that will be the sequester. All of these are self-inflicted consequences of rampant overspending in the federal government and a propensity to take the easy way out rather than budget responsibly. Overheated rhetoric plays a big role here, often distracting from the real problem by tugging at the heartstrings. Consider this your dose of debt ceiling reality.
Money on a plate, Image Credit: Shutterstock
Unlike the fiscal cliff, there is no date certain for when we will hit the debt ceiling. The Bipartisan Policy Center estimates it could happen as soon as February 15. Treasury Secretary Timothy Geithner projects we will hit the ceiling mid-February to early March, but warns that because tax season, there is a “a significant amount of uncertainty.” Forecasters have are using the ominous term “X Date” to represent the day we hit the ceiling. The level of uncertainty underscores the urgency of settling this issue sooner rather than later.
President Obama took an unusually aggressive posture in his press conference Monday, discussing the need to increase the debt ceiling. Pushing the political panic button, he named a litany of sensitive groupsthat would see cuts if we fail to raise the debt ceiling: seniors, veterans, nuclear inspectors and small business owners. Calvin Woodward with The Associated Press offered context to the president’s threat, noting, “It's possible, but not preordained, that Social Security recipients, veterans and beneficiaries of other cherished programs would take a hit. The administration has choices in how to spread the pain.” Woodward makes an overlooked point as well: it is President Obama alone who will determine what gets cut.
Obama then proclaimed, “[Congressional Republicans] will not collect a ransom in exchange for not crashing the American economy.” The “ransom” Obama refuses to surrender is spending cuts to our bloated federal budget as part of a larger debt ceiling deal. In fact, it’s Obama’s request for a “clean” debt ceiling vote that’s out of the ordinary. If history is any guide, a clean vote will result in a very short-term fix. According to Gordon Gray from the American Action Forum, most debt limit increases over the past twenty years were passed as part of a larger legislative package. Gray goes on to note:
"The duration of pure standalone debt limit increases is far shorter than that of debt limit increases enacted as part of broader legislative changes. Standalone measures lasted an average of 288 days, about two-thirds the 453-day duration of packaged increases."
Later in his speech, President Obama inadvertently made the case for spending cuts in a meandering analogy between the debt ceiling and the dine and dash:
"You don’t go out to dinner and then, you know, eat all you want and then leave without paying the check. And if you do, you’re breaking the law. And Congress is -- should think about it the same way that the American people do. You don’t -- now, if Congress wants to have a debate about maybe we shouldn’t go out to dinner next time, maybe we should go to a more modest restaurant…"
That’s the point. Congress does want to have a debate about not going to dinner next time or going to a more modest restaurant; it’s the president who doesn’t.
And given some of Washington’s spending excesses over the past year, there is room for cuts. For example: Tax cheats got $1.4 billion in stimulus loans, the Government Services Administration had a $44 million bonus pool (after it was revealed the agency held a swanky conference in Las Vegas), and the federal government spent $1 million on fruit fly testing. Is this really defensible as we run up trillion dollar deficits and shift even more of the burden to our children?
History is on the side of those who want to attach spending cuts to the debt limit, both in terms of precedent and policy. If the president really wants to avoid these frequent and damaging debt ceiling fights, attaching spending cuts seems like a no-brainer. A debt ceiling increase with spending cuts would pass with bipartisan support, put credit agencies at ease and build confidence in our government—not to mention it would take a bite out of our yawning annual deficit. It’s a new year, a new Congress and the beginning of a new term for President Obama. Let’s hope it means a new approach to spending and budgeting in Washington.
Gretchen Hamel is executive director of Public Notice,an independent non-profit organization dedicated to providing facts and insight on the economy and how government policy affects Americans’ financ
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