Bring Back the Debt Ceiling
Congress is in the process of abdicating its power to control the borrowing of the U.S. government, at a time when the national debt exceeds $17 trillion and continues growing unabated.
It waived this power twice last year, “suspending” the debt limit and thereby granting the U.S. Treasury temporary blank-check borrowing authority. The latest suspension expires this Friday at midnight.
The approach of that deadline should have sparked serious Congressional deliberations of how to reduce the growing debt burden on taxpayers. Instead, lawmakers are considering simply suspending the debt limit for up to an entire year, further abdicating their power to control borrowing.
The debt limit serves as an important congressional check on federal spending and borrowing. Without a debt limit, all control over borrowing decisions shifts to the Treasury secretary, who is appointed by the president. Effectively, this concentrates borrowing authority in the executive branch, and hands the president a blank check to borrow against the U.S. taxpayer.
Prior to 1917, Congress controlled all aspects of debt issuance, including the number of securities that could be issued, their maturity date, and the interest that would be paid on them. With the Liberty Bond Act of 1917, Congress delegated most borrowing decisions to the Treasury. It left the debt limit as the last tool Congress could use to exercise its constitutional authority (contained in Article I, Section 8, Clause 2) “to borrow Money on the credit of the United States.”
But last year Congress twice let this tool slip from its grasp. In February 2013, it temporarily “suspended” the existing debt limit until May 18, 2013. When that date came and went, Congress did nothing, and Treasury continued to borrow, using a number of legal debt-limit loopholes, known as extraordinary measures.
Only in mid-October, just days before those extraordinary measures would be exhausted, Congress lifted the debt ceiling. But, once again, it did so using a suspension, not by setting a new, dollar-denominated limit.
Politically, it’s no mystery why lawmakers are chary of voting to raise the official debt limit. It’s a highly public affair, creating a rare opportunity for shaming Congress and the president for their fiscal profligacy. Congressional challengers often highlight an incumbent’s vote to increase the debt ceiling in election campaigns.
Moreover, the public wants any increase in the debt limit to be accompanied by spending cuts. A Bloomberg national poll conducted in September 2013, just a few weeks before the last suspension showed that a large majority of Americans—61 percent—agreed that “it is right to require spending cuts when the debt ceiling is raised, even if it risks default.”
Rather than make tough spending decisions, Congress tries to hide the true size of what it considers to be acceptable debt by declaring “suspensions” that have no embarrassing dollar amounts attached.
This Saturday, however, we’ll see what those numbers are. That’s when Treasury accounts for how much it has borrowed since the October suspension. At nearly $600 billion in additional debt, the tally won’t be pretty.
Members of the House of Representatives are deeply torn this year over whether to demand any policy concessions or spending cuts with an increase in the debt ceiling. The bill presents an important opportunity to reflect on Washington’s unsustainable spending decisions and to debate necessary course corrections to avoid a fiscal crisis in the future.
Absent reforms, the Congressional Budget Office projects that the national debt will increase by roughly $10 trillion over the next decade, exceeding $27 trillion by 2024. If lawmakers fail to address the debt problem responsibly, younger generations will inherit a greater tax burden and a slower economy.
The best course of action would be to agree on a path to balance before increasing the debt limit. Moreover, both the House and the Senate should produce a budget resolution in 2014, showing taxpayers their budget plans for the next decade.
A requirement that the budget resolution reach balance before the end of the decade would further encourage Congress to begin discussing spending reforms to steer the U.S. off its dangerous fiscal collision course.
Importantly, lawmakers should recognize that debt limit suspensions represent abdications of Congress’s power to control the borrowing of the U.S. government. At the very least, they should put an actual limit on executive borrowing by setting a dollar-denominated debt limit.
Romina Boccia is the Heritage Foundation’s Grover M. Hermann Fellow in Federal Budgetary Affairs.
Image: Flickr/Nic McPhee. CC BY-SA 2.0.