Here we go again. In the context of the fiscal cliff negotiations, the debt ceiling is once again being discussed. President Obama wants to remove it as an issue, the Republicans don’t. I can understand the point of view of both sides, and why they would make the arguments they have, but I have to side with President Obama on this one. He said he wasn’t playing any more games. By that I take him to mean, “Let’s take the debt ceiling out of the political arena and focus on the actual issues”.
What is the debt ceiling and why does it matter? The federal government is in debt. Trillions and trillions of dollars in debt. The debt ceiling is a limit placed on how much money the government can borrow to pay what it already owes. Or, more technically:
The debt limit does not control or limit the ability of the federal government to run deficits or incur obligations. Rather, it is a limit on the ability to pay obligations already incurred.
So not increasing the debt ceiling doesn’t prevent us from taking on new debt, it actually just prevents us from paying back what we already owe.
The problem is that the debate over the debt ceiling is out-of-place. Should we have this much debt? No, of course not. We need to be much better at managing our money. That’s a debate that’s definitely worth having, but that’s not a debate over the debt ceiling. Debating over the debt ceiling is debating whether or not we should pay people that we already promised to pay. That’s a silly debate to have. The answer to that is yes. Of course we should meet our obligations and pay those we already promised. (Or, if we think we shouldn’t pay them, we should say so and try to renegotiate.) The credit rating of the US government is important, especially if we want to be taken seriously when/if we need to borrow more money. It shouldn’t be played with like that. It has serious repercussions.
It never used to be controversial. The debt ceiling was raised dozens and dozens of times, under both Republicans and Democrats. But rather than negotiate in good faith, the Republicans in Congress used the debt ceiling to hold the country’s economy hostage until they got their demands met. They did it before under Clinton, and they did it again under Obama. They risked, and this time damaged, the credit rating of the United States for selfish political gain.
Both sides are political, and both sides will take stands, but to risk the credit of the federal government? That’s pretty reckless. And it’s short-sighted. Regardless of what they may gain in the short-term, the long-term damage could be truly terrible. The debt ceiling should not be a political football. The US needs its credit rating. And its creditors, many of them its own citizens, need to know that they will get paid what they’re owed. If they’re really serious about debt, they should work to decrease the national debt.
But there’s a lot of evidence that Republicans are not actually serious about decreasing debt. If they were, they wouldn’t have increased the national debt under Reagan, or George H.W. Bush, or George W. Bush. No, they seem to only be concerned about debt when Democrats are president. Hence the politicization of the debt ceiling under Clinton and Obama. I’m not saying that Democrats don’t spend money and run up the debt, both parties do. I’m just saying that the Republican Party is not as serious about debt as it claims to be, and the idea that they are the party of fiscal responsibility is laughable.
For instance, under the last Republican president, George W. Bush, the national debt nearly doubled. And even if you agree with the actions taken during his presidency, you have to acknowledge that the long-term obligations the country was saddled with because of those actions continue to have serious fiscal impact: two wars, Medicare Part D, and huge tax cuts. How the Republican Party can out of one side of their mouth claim to be serious about fiscal responsibility, and out of the other side of their mouth push for large, unnecessary tax cuts defies all logic. Their claim that tax cuts create revenue is unproven.
If they really want to push the debt ceiling though, President Obama may have other ways of dealing with it. When it came up the last time, many people were talking about the 14th Amendment. The relevant part of that amendment says:
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.
It’s not entirely clear how the courts would rule should it be challenged in court. But it’s certainly not unreasonable to read it as saying that the debt ceiling could be ignored. It’s not something that should be invoked lightly, but if Congressional Republicans want to continue to play chicken with the federal government’s operation and reputation, it might be worth looking into.
There might also be another workaround for the debt ceiling. It’s called the platinum coin option. (I first read about it here, but it turns out this idea was also floated last time.) It goes like this: while the federal government can only print so much money, it can make as many coins as it wants. And in particular, they can make platinum coins in any denomination. So all they need to do is make some trillion-dollar platinum coins, pop them in the bank, and they’re golden. (Well, in this case, platinum.) Ridiculous? Yes. More ridiculous than threatening to shut down the entire federal government because you can’t get your way? I don’t think so.
Negotiation, and hardball negotiation at that, are commonplace in politics. When the most that can get bruised are people’s egos, it seems that’s fair game. But when the entirety of the government and the economy can be put at risk, it seems a more delicate approach should be taken. I don’t know if there’s any reasonable justification for that kind of risk, but if there is one, Republicans have sure not presented it. Until they do, let’s take the debt ceiling off the table. Let’s instead negotiate and compromise in good faith and come up with a solution to our fiscal issues. Surely a solution that involves a balanced mix of increased revenue and reduced spending can be found. Let’s all come to the table and talk reasonably and fix it, and leave the risk-mongering to others.
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