The Debt Limit
Government budgeting is complicated. The numbers are huge, the process is arcane, and virtually nothing about it is analogous to the personal, family, or business budgeting we are used to.
I’ve written before about the budget process and the calculation of the deficit and debt. But what’s going on this week (and goes on in the background almost all the time) is something different – the debt ceiling (or debt limit). I’m going to try to make sense of it for myself and hope that in the process I’m giving you some insights that help it make sense to you as well.
I’m going to start by going to the horse’s mouth – in this case, the US Department of the Treasury itself. One thing I found useful on this website was a historical picture of the interaction between the Secretary of the Treasury and Congress about this issue over the past decade or so. Here’s a link to what they say about this policy issue: https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/debt-limit#:~:text=The%20debt%20limit%20is%20the,tax%20refunds%2C%20and%20other%20payments.
Second, here’s some basic information on why we have a debt ceiling and how it has historically been managed. For this, I’m using Wikipedia, which is not a good academic source for anything but is not a bad general source. Here’s the article on the “History of the United States Debt Ceiling.” https://en.wikipedia.org/wiki/History_of_the_United_States_debt_ceiling#:~:text=In%201939%2C%20Congress%20instituted%20the,and%201941%20and%20subsequently%20amended.
Now I want you to see what the Brookings Institution (a respected left-of-center Washington think tank) thinks you should know about the debt limit. They conclude that the debt limit is unnecessary and obstructive, and they explain why Congress should eliminate the debt ceiling altogether. Here’s the link to their analysis: https://home.treasury.gov/policy-issues/financial-markets-financial-institutions-and-fiscal-service/debt-limit#:~:text=The%20debt%20limit%20is%20the,tax%20refunds%2C%20and%20other%20payments.
In his newsletter from Tuesday, Jay Kuo (a lawyer, Social Media expert, and composer) analyzed the current debt limit crisis while giving it a constitutional and historical spin. Here’s what he says:
Wednesday’s New York Times provides a sober analysis of the tools Treasury Secretary Janet Yellen can use to stave off the global economic catastrophe that would be spurred by the US defaulting on its debt repayments: https://www.nytimes.com/2023/01/18/business/economy/us-debt-limit-extraordinary-measures.html?smtyp=cur&smid=fb-nytimes&fbclid=IwAR10TGt1x4OeHXqldN7viviWQaKeNROWmz69_oL2aywWxYylh8aotfq112g
In her January 18 newsletter, historian Heather Cox Richardson comments on several events of the day, but focuses the last half of her newsletter on the politics of Republican opposition to raising the debt limit:
Economist Robert Reich, who served as President Clinton’s Treasury Secretary and is thus in a position to understand the implications of the possible failure to raise the debt limit, has nothing good to say about the current battle. His op-ed explains what happened in several recent debt limit confrontations. https://www.commondreams.org/gop-debt-ceiling-scam
Lucian K. Truscott IV always gets right down to it. Truscott comes from a proud and storied American military family. His grandfather (LKT II) commanded America’s 3rd Infantry Division and later the 5th Army in Italy during World War II. His father (LKT III) retired as an Army colonel after serving in Korea and Vietnam. The current Lucian (LKTIV) graduated from West Point in 1969, but he resigned his commission after 13 months in service and was discharged under “other than honorable conditions” after challenging mandatory chapel at West Point and later writing about heroin addiction among enlisted soldiers. Anyway, he has been a journalist, novelist, and social critic throughout his career. As you would imagine, he has something to say about the current situation.
This somewhat breezy Q&A from Slate addresses a number of issues related to the debt limit, including discussions of some recent instances when controversy erupted over the perennial need to raise the debt ceiling in order to pay the government’s bills. It also mentions the various deals that Speaker McCarthy struck during the marathon Speaker election last week – deals that will make negotiations over the debt limit more difficult. https://slate.com/news-and-politics/2023/01/what-is-the-debt-ceiling.html?via=rss_socialflow_twitter
This article from US News is ten years old. Still, it presents some interesting comparisons in the way the debt limit is used by the only two countries in the world that have such a policy – Denmark and the United States – and a couple of sentences about the political reasons for the creation of the debt limit in 1917. https://www.usnews.com/news/articles/2013/10/11/why-do-only-us-and-denmark-have-a-debt-ceiling
Despite what you hear from the GOP, the argument over increasing the debt ceiling is not about controlling government spending. Nor is it about government accountability. It is performative, reflecting a Republican Party whose Congressional clown car has nothing but performance to offer. It allows them to pretend that they are serious about governing while they ignore newly-elected serial prevaricator George Santos, promote Team Crazy within their own membership, support insurrectionists, and fund-raise on right-wing media.
Meanwhile, serious damage is imminent. This issue is not something most of us think about. We ordinary folks don’t always understand government finance, we confuse the deficit with the debt, and we have a skewed perception of how the government spends its money. The Republican Party is not concerned about clearing up this confusion; instead, they are banking on generating outrage rather than understanding, polarization rather than compromise, and grandstanding rather than solutions. It’s easier for the party and for its political base.
Great sites. Thank you.