There’s finally some movement in Washington on raising the debt ceiling. Or, at least, the key players want to give the impression of movement, even if no one expects actual negotiating—much less a willingness to cede ground—until we’re much closer to a US default.
If you’re like me, you can’t help but view this brinksmanship—with US financial credibility and the economy on the line—with a mix of impatience and resignation. Why impatience? Because what’s going on in Washington right now is a waste of time. It seems unlikely that Congress would willingly cause chaos in world financial markets, but its members seem happy to waste valuable time they could be devoting to more productive work on the threat that they might. Very few people on Capitol Hill expect Congress to fail to raise the debt ceiling; in essence, this is a political game that’s become a gridlock-inducing diversion.
And resignation? Because in the heated partisan atmosphere that’s permeated Washington for the last few decades, a fight over raising the debt ceiling seems to have become part and parcel of the congressional calendar. Waste of time that it is, you can pretty much set your clock by it.
However, let’s take a step back for a moment and consider what’s at stake. Because this is serious business.
While it’s a bit unclear exactly when the Treasury will run out of room for the “extraordinary measures” it’s been taking since the nation hit the debt ceiling in January, it could be as soon as early June. If that should happen before a deal is reached, the US will have no choice but to start defaulting on some of its bills. It might, for instance, keep paying interest on debts, keeping the markets calmer, if not exactly tranquil. But that would probably mean not paying federal workers and contractors, Social Security recipients, or veterans’ health care benefits, which would be politically wrenching. On the other hand, if the government misses even a single debt payment, it would ruin global confidence in US debt, with consequences for our economy that would last for years.
You might ask how we got to this point. There’s a lot of misperception about why the debt needs to keep being raised, but it’s pretty simple: Most years, we spend more than we take in. This has been a truly bipartisan endeavor: Of the presidencies over the last five decades, the debt grew most in percentage terms under Ronald Reagan, George W. Bush, and Barack Obama—though in dollar terms, it grew almost as much during Donald Trump’s single term as it did during Obama’s two terms.
There’s no question that some of those increases came because of spending—most recently, on the pandemic and keeping the economy afloat because of it. But it’s worth noting that the primary reason Reagan, Bush, and Trump figure as major debt contributors is because they pushed through huge tax cuts during their time in office. Though the Reagan cuts were partially reversed under Bill Clinton—producing actual budget surpluses—the Bush and Trump cuts have made it virtually impossible for revenues to keep up with spending.
So in upcoming weeks, as congressional Republicans and Democrats in Congress, along with the Biden White House, issue talking points aimed at making the other side look bad, remember that taking steps to avoid building up the US debt requires looking at the full picture: tax and fiscal policy as well as spending. And as the rhetoric grows more heated, remember this, too: This doesn’t have to happen. Congress could just decide to get rid of a ceiling on the debt, and choose instead to spend its time addressing the actual challenges the US faces—including budget deficits—rather than engaging in debt theater. There are too many players who relish wielding the debt-ceiling cudgel for such a move to be likely. But it would be good for the country if it happened.