Congress Should Put Down the Gun: End the Debt Ceiling
However unlikely it may seem, there are times when Congress and President Obama can agree to do the right thing. Back in January was one such time. After reaching an agreement on extending a portion of the Bush tax cuts and continuing emergency unemployment benefits, Congress and the president agreed to suspend the debt ceiling.
This was an innovative move. They didn’t raise the debt ceiling, setting a level which the government would again hit in six months or a year. They simply said that the ceiling would not apply for the next four months, putting May 18 as the date when the suspension of the ceiling came to an end. This meant that the country didn’t have to worry for these four months that the legal status of the government’s credit would come into question.
This success should set a simple example that Congress can follow going forward. Instead of setting an end date for the suspension, why not just suspend the debt ceiling indefinitely. This would make the United States just like every other democracy in the world.
The United States Congress sets out what money should spend and how much taxes will be collected and the executive branch spends and taxes in compliance with the law. If Congress requires the president to spend more than the government collects in taxes, then the government borrows the difference.
It’s all pretty simple. If Congress decides it’s unhappy with how much the government is borrowing then it cuts back on spending and/or raises taxes, as it has in fact done over the last two years.
It’s not clear why anyone needs a debt ceiling in this story. The possibility that the debt ceiling will be breached and the president will have to decide which spending he will do, and which spending he will ignore, creates an element of unneeded uncertainty that could have serious consequences.
While “the second Great Depression” catastrophe stories that some have spread are unfounded, does anyone really want a situation where the president will unilaterally decide whether to pay interest on the debt, Social Security, or meet the payroll for the military? The debt ceiling creates an absurd legal situation under which the president is caught in an unavoidable contradiction. He is supposed to spend the money allocated by Congress, but Congress has prohibited him from borrowing the money needed to carry through this spending.
There are clearly serious differences on tax and spending priorities between the Republicans in Congress and President Obama. For that matter, there also appear to be serious differences between President Obama and most Democrats in Congress, most notably on the president’s plan to cut Social Security. But there is no reason that these differences cannot be battled out through the normal political process, without the threat of the debt ceiling hanging over everyone’s head.
Congress and President Obama showed good judgment when they agreed to suspend the debt ceiling back in January. There is no reason that they can’t just do it again and put this threat to the country permanently off the table. That may make budget reporting a bit less exciting for the D.C. press corps, but it would allow Washington to focus on real world problems instead of self-made crises.
Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The End of Loser Liberalism: Making Markets Progressive. He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues.