Published: January 31, 2011
At a recent gathering of House Republicans, lawmakers made it clear that they intend to hold an increase in the nation’s debt limit hostage to major spending cuts.
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Clearly, the Republican aim is to demonstrate their fiscal prudence, as well as their new political power in the Republican-controlled House. Don’t be fooled. When it comes to debating the debt limit the facts matter little. It’s all about posturing.
The debt limit is a cap set by Congress on the amount the nation can legally borrow. The current limit, $14.3 trillion, will be hit sometime this spring. Unless Congress raises it before then, the government will have to resort to temporary tactics, like freeing up money to pay current bills by delaying payments to federal retirement funds. The longer a standoff endures, the worse the choices are. For instance, the government might defer other payments, like tax refunds, as it husbands resources to avoid a default on the public debt.
All that would surely be disruptive and could be disastrous if the nation’s creditors began to doubt America’s reliability.
The debt limit is a political tool, not a fiscal one. First enacted in 1917, it was intended to make lawmakers think twice before voting for tax cuts and spending increases that run up the debt. Unfortunately, it has never worked that way. Federal debt is high despite the limit because lawmakers repeatedly enter into expensive and recurring obligations without a plan to pay for them — in recent years that includes two wars, the George W. Bush-era tax cuts and the Medicare drug benefit.
As the costs pile up, the debt limit must be increased — not to make room for new spending, but to raise money to pay for past commitments.
It is, of course, utterly disingenuous to vote for policies that drive up the debt and then rail against raising the debt limit when the bills come due. It is akin to piling up purchases on credit and then threatening to bounce the payment check. But that is what Republicans are saying they will do unless they win deep cuts in future spending in exchange for a debt-limit increase today. So much for fiscal prudence.
A better approach would be to pay for legislation when it is enacted, generally by raising taxes or cutting other spending. The new House leadership has rejected that approach when it comes to their No. 1 priority: cutting taxes.
They have passed new budget rules that allow taxes to be cut without offsets to replace the lost revenue. The new rules also forbid raising taxes to pay for major new spending, like Medicare expansions, requiring instead that any such spending be offset by cutting other programs. That is a recipe for fiscal irresponsibility.
House Republican leaders have not said which spending cuts they will demand for a debt-limit increase. They know that voters don’t want to hear about losing college aid, environmental safeguards or investor protections. They may try to call for overall spending caps that would let them take credit for spending reductions without explaining or defending particular cuts.
What is known is that deep immediate spending cuts would be unwise at a time when the economy and so many Americans are still struggling. President Obama and Congressional Democrats need to push back by challenging House Republicans on the hypocrisy of their new budget rules and by making it clear that playing games with the debt limit is irresponsible.
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