Congress has been in a twist over raising the nation’s $28 trillion debt limit by deadlines that seem to be on perpetual reset. At the end of this month the July deadline may truly expire, freezing the borrowing authority of the Treasury Department.
The notion is humiliating – the U.S. Government, a $7 trillion annual enterprise, rifling the kitchen cookie jar and lifting sofa pillows for money to pay the bills, starting with Social Security, federal salaries, and interest on the federal debt.
Such a spectacle was once unthinkable, the planet’s greatest country falling to debtor status and sending the global economy into a tailspin. But these days, Washington is less about running a great country and more about running the war dances of tribal politicians. A routine matter of raising the debt ceiling is stalled by brinkmanship, procrastination and political gridlock over the budget.
The federal debt, though, is a creation of Congress. It’s a byproduct of spending authorized by the House and Senate – and all that money flowing to special interests in special states, including aid to Kansas agriculture and grants and loans to cities and counties.
Debt allows the government to borrow – sell bonds, for instance – to pay the bills that the Congress rings up on credit.
The debt ceiling is the maximum amount the United States can borrow by issuing bonds, as in the limit on a credit card. The government is about to max out. Extending the debt ceiling is akin to increasing the government’s credit limit.
Saying no to a credit increase is the Congress’ way of saying, we bought all this stuff but now we don’t want to pay for it. It does nothing to resolve the issue of spending in the first place, but should the United States be known as the world’s wealthiest deadbeat?
The budget deficit is the annual difference between money in and money out; the debt is the accumulation of those deficits over the years. The current deficit doubled from $665 billion to $1.3 trillion from 2017 to 2019, due largely to Trump tax cuts and a doubling of Pentagon spending to $800 billion. The deficit has since increased to $3.3 trillion, mostly for more than $2 trillion in multiple stimulus measures to combat the covid pandemic’s economic impact.
Year after recent year, the Treasury Department has reported that the deficit swallows up more of the national economy. The Senate’s infrastructure bill contains $256 billion in deficit spending. Another $3.5 trillion plan for health care, education, child care, immigration and other social policies, is in the wings. Much of this is proposed to be paid through tax increases on corporations and the wealthy.
Over-spending and under-taxing adds to the deficit and the debt. But what will it cost America if we don’t invest in infrastructure and badly-needed social programs? We have a deficit problem and a credit problem, and above all we have a problem with Congress, where self interest rules and the national interest goes begging.
The federal operating deficit is now at roughly $275 billion a month more than the government collects. This will lengthen the shadow of that overall federal debt of $28 trillion, give or take a trillion.
Net interest on the debt over the next decade will come to about $10 trillion or more. Future generations will reckon with this – higher interest rates, inflation, depressed markets. Alarms over Medicaid and Social Security ring out. The Budget Office says their trust funds will begin to run dry in about 15 years. This would trigger automatic cuts in many benefits, including cuts of 20 percent or more in Social Security checks for retirees.
In 2013, a bipartisan commission created a blueprint for reducing the federal debt and balancing the budget. The commission was headed by former Sen. Alan Simpson, a Wyoming Republican, and Democrat Erskine Bowles, former White House chief of staff for President Clinton. Their panel began work in 2010 and published the first of its proposals three years later.
Under Simpson-Bowles, spending for the “Big Four” – Medicare, Social Security, Medicaid and Military Spending – would be reduced; taxes would increase, if only to begin paying down the debt for a 20-year war launched in 2001and financed on credit. Simpson-Bowles outlined how this could be done, including resolutions for a considerable list of obstacles. It offered equitable reforms for each of the Big Four plus measures to achieve rather painless tax increases.
Simpson-Bowles was a gift to the Congress, a careful and lucid starting point for a plan to reduce the federal debt. But when opportunity knocks, the Congress won’t answer. It runs for a rear exit.