This was originally published in The Hill.
As we continue to monitor the hourly reports on whether Congress will grant authority to borrow the money needed to pay the nation’s bills, it is worth noting that the United States got along for 128 years without having a formal debt ceiling. So how has this limitation helped us manage our finances?
The first debt limit legislation was attached to the Liberty Bond Act in 1917 (to help finance WWI). At that time the public debt that had been accumulated since the birth of the nation totaled less than $6 billion—equal to less than 10 percent of the nation’s gross domestic product in that year. But the limit on borrowing seemed to have an inverse impact on deficits. Within only three decades of enactment, our public debt was $257 billion, equaling 105 percent of GDP—more than 10 times the debt-to-output ratio the country had when the requirement for debt limit legislation was adopted.
Since 1947 we have had periods of sound fiscal policy and periods of runaway deficits. The regular votes for changes in the debt limit accommodated both. As the Truman, Eisenhower, Kennedy, Johnson, and Nixon administrations cut the public debt from more than 100 percent of GDP to about 25 percent, Congress gleefully lowered the debt ceiling. When tax cuts and the military spending of the Reagan administration pushed the gross public debt from 31 percent of GDP in 1981 to 65 percent by the end of the first Bush administration, Congress went along every time. Presidents Reagan and Bush signed every increase.
The reason Congress has voted for the debt increase is not that any of them looked forward to telling their constituents that they favored increased indebtedness, but because debt limits don’t control spending or the tax legislation necessary to pay for spending. Debt limits simply allow the U.S. Treasury to take the steps necessary to pay the bills that earlier legislative actions have created.
You might compare a decision to block an increase in the debt limit to that of a father who is so angered by the excessive spending he finds on the credit card he has given his son that he refuses to pay the credit card company the $500 in charges. Later he finds that he is not only being sued by the credit card company but that his deteriorating credit score has precluded him from refinancing his house, a move that would have saved him thousands.
Debt limit votes not only place the good faith and credit of the United States at unnecessary risk but also inject a destructive element of confusion into our public discourse that erodes the accountability of public officials.
More than once in my three decades in working for Congress, I witnessed the very members who led the charge in placing unconscionable earmarks in appropriation bills and outrageous special-interest carve-outs in the tax code turn around and pose as fiscal purists by opposing an increase in the debt limit—an increase which was made necessary in part by their own fiscal irresponsibility.
That is not unlike what is going on in Congress right now. More than a few of the conservative leaders now traveling to the White House to say no to a new debt level were in Congress in 2001, 2002, and 2003 when we lost our fiscal footing and put the nation on the deficit trajectory that has led to the sad necessity of raising the ceiling.
But what is perhaps the least-talked-about aspect of the current debt confrontation is that the budget resolution that passed the Republican-controlled House of Representatives in April—which would result in the debt growing from less than the current $14.3 trillion where it is today to $23.1 trillion in the next decade—is an increase of $8.8 trillion, or 62 percent. That is more than four times the amount of borrowing that the president has requested authority for and there is virtually nothing in that resolution that would prevent the government from running out of money in the next few weeks.
If Congress needs a vehicle to extort concessions from the executive branch, it has appropriation bills, trade bills, and numerous other alternatives. It does not need to make the threat of making the United States a deadbeat as a means of promoting its agenda.
This is not just a meaningless exercise; it is a dangerous and meaningless exercise.
Scott Lilly is a Senior Fellow at the Center for American Progress.
This was originally published in The Hill.