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Debt Ceiling Folly
Posted on May 2, 2011
WASHINGTON—Starting this week, the talk in our nation’s capital will be dominated by whether or not Congress should raise the debt ceiling—as if we have any choice but to pay off our obligations. It will be a colossally foolish and self-destructive battle, another sign of how fanaticism and ideological obsession are rendering our country ungovernable.
Republicans, joined it seems by some terrified Democrats, are trying to use the debt-limit vote to force cuts in spending that they could not win on the merits. If the debt ceiling isn’t raised, the government could face the possibility of defaulting. Even if default doesn’t happen, global markets could punish us by demanding higher interest rates on our debt.
Thus the first reason why this fight is counterproductive: Those who would use the debt limit as a way of reducing spending risk increasing the deficit by forcing our debt-service costs upward.
Moreover, conservatives show little actual interest in decreasing the deficit. Yes, you read that right. What they really care about is reducing government outlays and keeping tax rates on the wealthy low. If this were truly about the deficit, tax increases as well as spending cuts would be on the table. But most of the proposals out there—especially those pernicious artificial caps holding federal spending to a low percentage of gross domestic product—rule out tax increases.
One of the worst proposals on offer would limit federal spending over time to 20.6 percent of gross domestic product. It’s the idea of Sens. Bob Corker, R-Tenn., and Claire McCaskill, D-Mo. Another Democratic senator, Joe Manchin of West Virginia, signed on last week.
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Using spending patterns from the past to pretend that we can hold federal spending this low ignores the fact that the American population will be growing grayer for a long time. The Census Bureau has estimated that the number of Americans age 65 and over will reach 88.5 million in 2050, more than doubling the 38.7 million who were that age in 2008.
And no matter how creative and bold we are in containing medical inflation, health care will rise. Even with substantial cuts, it will be hard to keep current promises without spending somewhere between 23 percent and 25 percent of GDP on government.
Thus, in a meticulous analysis of the Corker-McCaskill proposal, the Center on Budget and Policy Priorities concluded that “it would inevitably force enormous cuts in Medicare, Medicaid, and possibly Social Security.” Buying into this cap means buying into Rep. Paul Ryan’s budget, which is becoming more unpopular by the day.
If McCaskill and Manchin want to run for re-election on the Ryan budget next year, they are welcome to. It’s hard to imagine things working out well for them if they do.
Speaking of the Ryan budget, it is utterly disingenuous for its conservative supporters in the House to say that raising the debt ceiling is outrageous because they have already voted for a massive increase in the debt. Ryan’s own numbers show that his budget would require the debt ceiling to be raised by $8.8 trillion—that’s a “t”—over the next decade. So all this fighting is little more than a political charade.
Congress should simply pass the increase in the debt ceiling and then move on to debate specific measures to bring the deficit down that are not limited to cuts. You can’t find a more certifiably pro-business, centrist deficit hawk than Sen. Mark Warner, D-Va., and he was typically direct in saying that the debt limit “is not something we should mess with.” (It would also be nice if someone noticed that our growth rate is still anemic and what we really should be talking about is job creation.)
But if it takes some kind of “trigger” to control future deficits to get the debt limit passed, it has to be one that allows for the possibility of tax increases as well as spending cuts. Otherwise, Congress will just be enacting the Ryan budget by stealth.
E.J. Dionne’s email address is ejdionne(at)washpost.com.
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