This week, President Trump will sign into law the 79th debt ceiling extension since 1960. For decades, the debt limit – the statutory limit on federal debt – served as reason to express concern over the growth in debt and Congress would occasionally include reforms to try to address the problem when they passed a hike. The debt ceiling extension was used seven times to put budget controls in place – most famously the now defunct Budget Control Act of 2011.
Yet, over these last six decades, the national debt has ballooned by an astounding 8,000%.
It’s no wonder that budget experts on the left and right are increasingly coming to the conclusion that the debt limit has outlived its usefulness.
Without a doubt, the debt limit has failed to restrain the national debt. Now, our leaders in Washington are using the debt ceiling to exacerbate the problems – utilizing the last two debt ceiling deals to boost deficit spending by an additional $2 trillion.
This perversion has rendered the already limited debt ceiling tool utterly useless. Even though the debt ceiling is an arbitrary political tool that causes more harm than good, it should not be eliminated. Instead, Congress should reform it, giving it legitimacy as a mechanism intended to fix our nation’s massive debt problems.
Most proponents of eliminating the debt ceiling argue that the risk of default by political theater gone awry is too great to the global economy. The risk of a manufactured default is undoubtedly real, but so is the risk of not addressing our spiraling debt that will soon be tacking on a record setting $2 trillion in deficits every year within the next decade. This unsustainable trajectory not only threatens to bring about a fiscal crisis, it is slowly sucking the economic opportunity from younger generations that will be stuck with the fallout from this profligacy.
The debt ceiling is doing nothing to stem these out-of-control deficits. Because it’s structured to be a haphazard tripwire with no real connection to the manner and the pace that our debts are accumulated. Rather, Congress has gotten into the habit of just suspending the cap for a politically calculated period of time (typically just past the closest major election), only to be suspended again once it is reached.
It would be like a weight loss plan where instead of incorporating healthy eating and exercise habits, all you have to do is go stand on a scale every two years and then continue living life as usual.
It’s time for Congress to actually incorporate a healthy budget regimen.
Instead of setting an arbitrary deadline, Congress should set a biennial debt target to stay under. Every two years – for example, July 31 of the non-election year – the debt limit will be reached. If the debt is below a pre-set target, the ceiling can be raised by the President. Congress will then have the option to pass a resolution of disapproval (per the 2011 Budget Control Act construct).
But if the debt is above the threshold, Congress would be required to pass the debt limit through regular order – which would bring about meaningful debate and action to address why they missed the mark. The targets could be nominal debt, debt-to-GDP, or any other metric that provides a meaningful goal for Congress.
A checkpoint with targets would create a stronger culture of fiscal accountability in interim periods between debt limits while still providing heightened, yet purposeful, moments that focus attention on our nation’s massive debt problems if the goals are not achieved. This thoughtful, forward-looking statutory debt limit would provide a more credible forum to course correct when targets are missed.
Those who want to do away with the debt limit argue that Congress is merely voting again to fund the things they have already passed and that worries about the increasing debt “should be expressed when the policies that actually increase the debt are voted on.”
That’s a reasonable point. But most sitting members have never voted on a substantial portion of our country’s spending policies. There is not a single member left that voted on the passage of Medicare and Medicaid in 1965, let alone Social Security in 1935. These three programs are taking progressively larger portions of the federal budget. Yet, they are set on autopilot, never to be debated or voted upon.
Thoughtful and enforceable targets that force Congress to actually address the underlying drivers of our debt – the structural imbalance between stagnant revenues and exploding entitlement spending – can be designed.
The statutory debt limit is the only mechanism that serves as a proxy for Congress’ disastrous fiscal mismanagement. But, the United States’ debt challenges need more checkpoints than simply tripping over a randomly set deadline every so often. Instead, the debt ceiling should shift from an arbitrary time where Congress tries to avoid self-inflicted catastrophe every two years to a process that actually deals with the underlying issues.
As evidenced by this week’s coupling of a two-year debt ceiling hike with a $1.7 trillion spending boost, the fact is today’s politicians want to impose the consequences of over-promising on future generations rather than present Congresses.
That can, and must, change.