The Debt Ceiling: America's Zombie Politics
For some reason, America comes with a self-destruct button, and House Republicans just can't seem to keep their fingers off it. I'm referring, of course, to the debt ceiling. It's long past time we got rid of it.
On Friday the United States will hit the limit of its borrowing capacity, creating the second debt limit crisis in less than six months. According to Treasury Secretary Jack Lew, now-ordinary extraordinary measures can float the government until the end of February, but no further. After that the government starts to default on its bills.
For a look at the potential consequences (beyond being a deadbeat nation), see Kevin Roose's excellent piece from the last time we had this conversation. Long story short, it could destabilize the entire U.S. economy, cost countless jobs, cast millions of people into poverty and have far reaching effects beyond our shores.
Naturally, House Republicans haven't yet decided on their ransom demands to keep that from happening. According to the Washington Post , a "clean debt-limit extension is not yet on the GOP's radar," and party leadership has "narrowed their list of possible debt-limit strategies to two options: trading a one-year extension for approval of the Keystone XL pipeline, or trading a one-year extension for repeal of a provision of the Affordable Care Act."
The answer should be neither. Congress needs to do away with this statutory relic. The debt limit has become a zombie issue in American politics, something that should stay dead yet keeps coming back again and again to haunt us all. Every time we think it's gone, the debt limit lurches back into the news threatening marketplace collapse if politicians don't act quickly enough.
And there is absolutely no upside.
From a bureaucratic standpoint the debt limit hasn't been relevant in nearly a century. It's a relic from World War I financing that puts a hard cap on how much money the U.S. Treasury can borrow to pay the nation's bills. It does not (and I cannot emphasize this enough) limit government debt, it limits who holds that debt.
Congress creates debt through the budget and long-term obligations such as Social Security. It buys goods and services in the form of salaries, doctor's bills, invoices for tank parts, etc., and the Treasury borrows when it needs more cash to pay those bills. The debt itself is created when Congress authorizes those purchases; the debt ceiling just deals with whether we owe our soldiers or our banks.
Think of it like hiring a mechanic. Putting the repairs on a credit card doesn't create new debt, you've simply transferred it from the garage to the bank. Deciding after the fact that you should have spent less isn't an option. To extend the analogy, at the end of February the Treasury will be standing in Tom and Teri's Autobody with a new set of brakes and a maxed out Visa card.