Why we need to scrap the debt ceiling
Back when I was in Congress, I got a call from a constituent one day. I'd recently voted to raise the nation's debt ceiling, and the man was more than irate. "Don't you understand that we've got a serious spending and debt problem in this country?" he asked. "Why did you cast this idiotic vote?"
He was right about the problem. But he was wrong about the vote. With Congress fast approaching another debt-ceiling vote and yet one more "fiscal cliff" drama taking shape, I'd like to explain why that is.
If you ask members of Congress, which regular vote they most dread, this one would probably top the list. It's hard to explain to constituents why raising the debt ceiling is necessary, as indeed, I had trouble explaining to my own constituent. It's an unpopular vote to cast, and many members simply will not do it. Yet they recognize that if a majority of their colleagues sided with them and voted against raising the ceiling, we'd be in deep economic trouble.
The key thing to understand is that raising the debt ceiling is not about increasing spending. It's about paying the bills for purchases we've already made. Refusing to increase the debt ceiling is like putting your child in day care so you can work, getting your transmission repaired so you can get there, and buying work boots and a hard hat so you can stay safe — and then telling your preschool, mechanic and local storekeeper you have no intention of paying them. Only, if our nation were to do this, the results would include plummeting investment, rocketing interest rates and an economic downturn that could be catastrophic.
At the moment, our debt is about $20 trillion, or about $160,000 for every household in the U.S. We have to find a long-term path to deficit reduction — through spending reductions, increased taxes or a combination of the two. But using the debt ceiling as a means of reining in excessive spending has not worked since an aggregate ceiling was put in place almost 80 years ago. The political capital devoted to raising the ceiling every year would be far better spent putting us on a sustainable budget path.
Indeed, I'd argue that the nation would be better off scrapping the debt ceiling altogether. I know of no other major country that has a debt-ceiling requirement. It has become a political football. Rounding up the votes takes a huge amount of precious legislative time and energy. Most people in Washington understand that a default by the United States would be calamitous for our own economy and for the world's, which means that once we put the debt-ceiling requirement in place, this bill simply must pass. This, in turn, gives members of Congress great leverage to try to get something else they want.
Right now, congressional leaders are stumped. Members of the Republican majority don't want to vote for raising the ceiling — but the leadership knows that they control the government and can't simply let it default on its payments. So, much to their chagrin, they'll most likely have to negotiate with the Democrats and with Republicans who can be won over, handing members the chance to exact policy concessions that should instead be considered on their own merits. Even the run-up to an eventual vote is likely to be chaotic, risking a dip into a recession by damaging confidence in our economy.
This yearly battle isn't worth it. The issue isn't the debt ceiling. It's the debt itself — and deficit spending. Our political efforts should go toward finding long-term solutions that restrain spending and boost tax revenue. With all the built-in spending we have — Social Security, Medicare, defense spending and the like — the deficit problem is only going to get worse if we don't address it now.
It's worrisome that there appears to be no plan to address the debt ceiling in Congress, despite pleas from the president's economic advisers to do so by the end of July. It's even more worrisome that congressional leaders don't appear ready to address the core need: realistic, long-term deficit reduction.
Lee Hamilton is a senior adviser for the Indiana University Center on Representative Government. He was a member of the U.S. House of Representatives for 34 years.