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The Debt-Ceiling Dance and the Annual Budget Ritual
Posted By Mark W. Hendrickson On February 28, 2011 @ 12:30 pm In Economics & Political Systems | No Comments
Once again it’s time to talk about raising the statutory limit on the U.S. government’s debt—the so-called “debt ceiling.” Treasury Secretary Timothy Geithner has estimated that Uncle Sam will reach the debt ceiling before Tax Day, possibly even before the end of March.
Even earlier, on March 4 to be precise, the current appropriations resolution that is funding government spending will expire.
Are these two stories giving you a sense of déjà vu? They should. These two closely related issues are perennial events. Congress has raised the debt ceiling 74 times in the past 70 years, and, of course, passing an annual budget is necessarily an annual event.
The same two sides square off against each other on both issues. On the one side are the (relatively) fiscal conservatives, the so-called “deficit hawks,” the belt-tighteners; on the other are the budget-busters, the “deficit doves,” the big spenders.
The big spenders are riding a long winning streak. Every time federal debt has reached the debt ceiling, Congress has raised it.
Prediction: There may be some fireworks first, but Congress will soon raise the debt ceiling again, and raise it significantly. Look at the numbers: President Obama has mentioned a possible $30-billion reduction in spending from a pending $1.65-trillion deficit this year. Speaker Boehner has countered with a proposal that is doubly large: $61 billion. One is tempted to say that the hotly contested debate between shrinking the deficit 2 percent or 4 percent is a tempest in a teapot.
Let’s look at the numbers another way: Even if $61 billion ends up being trimmed from the budget, Uncle Sam will still spend over $3.6 trillion this year. Here’s a trivia question for you: Who was president when Uncle Sam spent $2 trillion in a year for the first time? Give yourself an “A” if you answered George W. Bush.
Federal spending has nearly doubled in the last decade—a decade of anemic economic growth, as is the rule when government expands at the expense of the private sector. Obama has talked about hitting “reset” buttons on other issues. Why not get serious about runaway government and reset federal spending to where it was, say, five years ago? The sad thing is, even such a gigantic pruning as that would still leave Congress having to raise the debt ceiling, because the deficit would still be enormous, further adding to the national debt.
Every year, we go through the same ritual before passing a red-ink-drenched budget. Deficit hawks protest the immorality of burdening the next generation with debt and warn of potential catastrophe if the government goes further into debt. What they are up against is this: There are far more lobbyists defending specific dollars of federal spending than there are in favor of cutting them, and besides, the big spenders don’t worry about deficits because national bankruptcy serves their agenda. Perhaps someday there will be enough tea partiers in Congress to force across-the-board cuts or eliminate rafts of federal agencies, but not yet.
As for the debt-ceiling dance, it, too, follows a familiar pattern. The belt-tighteners warn of eventual chaos when the federal debt finally reaches a breaking point; the big spenders warn of the immediate inconveniences that would result from failing to raise the debt ceiling, and thereby partially shutting down government.
In what amounts to a high-stakes game of “chicken,” the big spenders always win, because the fiscal conservatives always blink. They know that a majority of the public fears the disruption of a government shutdown today more than they do a potential major upheaval at some unspecified date in the future. We fiscal conservatives have come across like the boy who cried, “Wolf!” We have warned about the perils of red ink for years, but Armageddon hasn’t come. I think we will be proven right eventually, but we can no more foretell when the federal debt will blow up than one can predict which straw will break the camel’s back.
Have you asked yourself why we are debating raising the debt ceiling above $14.3 trillion? Answer: because earlier congresses didn’t rein in spending and curb the national debt at $10 trillion, $5 trillion, $1 trillion, or less. The big spenders always prevail in the annual budget ritual and the debt-ceiling dance. Someday, we will mourn that fact.
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