Why the Debt Ceiling Showdown Matters
Democrats continue to drive up the debt because they know Republicans will be blamed for any effort to enforce fiscal restraint.
Once again, our fearless leaders in Washington begin their debt ceiling dance. We all know the steps. Get elected on promises to rein in spending, toss those promises by using pork-laden legislation to buy votes to get reelected, blow through taxpayer money with abandon, then panic and get into a political battle royale when the bill comes due again.
What makes this latest debt ceiling showdown different? The numbers should surely make us care. The current ceiling of $31.4 trillion was set in December 2021, a $2.5 trillion raise that the federal government blew through in about 13 months. The debt is currently 120% of GDP, and it’s been over 100% of GDP since 2014.
The last decade has played out almost as if there were a faction in Washington determined to drive us off the fiscal cliff. President Barack Obama and his fellow Democrats in Congress used the Great Recession as an excuse to push the first-ever trillion-dollar annual budget deficits. The spending, though, didn’t bring about a faster economic recovery; in fact, the economy didn’t really recover to pre-recession levels till the tax cuts enacted by Donald Trump took hold in 2017 and 2018. But the spending did expand entitlements and raise the number of people who became eligible for them — and dependent on them.
While the economy roared during the Trump presidency prior to COVID, spending never really abated. After COVID, the government tossed out trillions of dollars in new “emergency” spending, a large portion of which was unrelated to the pandemic. Shockingly — or perhaps not so shockingly at all — government bean counters still can’t account for hundreds of billions of dollars of that money.
Now, with spending continuing at a feverish pace under Joe Biden, we face what may be the 100th debt ceiling adjustment in our nation’s history. With the debt level threatening the once unimpeachable full faith and credit of the United States and rapidly becoming one of the nation’s most pressing national security issues, we finally have a chance to face the issue and make real change.
Here’s what the Democrats have in mind. First, they’d like to do away with the debt limit altogether. By removing the debt ceiling, the “logic” goes, they could remove the issue of a debt ceiling crisis. This is akin to repealing the laws against breaking and entering in order to reduce the number of home robberies.
Next, Biden is refusing to negotiate any spending deals with House Speaker Kevin McCarthy – in stark contrast to his previous positions on such negotiations. This seems counterintuitive, since spending is at the very heart of the debt ceiling issue. But since more than 90% of the current federal debt has been accumulated since Biden joined the U.S. Senate in 1973, maybe this president has a personal attachment to keeping debt alive. Regardless, he surely bears a good portion of the responsibility.
Third, Senate Majority Leader Chuck Schumer and House Minority Leader Hakeem Jeffries have done their part to pre-demonize Republicans for the current debt crisis. Playing to the media’s long-held habit of automatically blaming the GOP for any government fiscal woes, Schumer called on House Republicans to make plain where they want to make spending cuts. It’s a clever tactic because any meaningful spending cuts are going to be painful to recipients of federal largesse. Fiscal restraint has been set aside for so long that we’re now at the point where the only way to bring sanity to the system is to lose some of the things we love most — namely, Social Security and Medicare. It’ll be easy to make Republicans the bad guys here, even though they’re absolutely correct.
The Republicans have made a good first move by demanding that spending negotiations be part of any debt ceiling increase. But they’ll have to pick those spending targets carefully and be prepared to defend them against Democrat attacks that will be amplified ad nauseam by their Leftmedia lickspittles. The big question is: Will Republicans remain united throughout a fight that’s expected to play out at length during the spring?
Default on the debt is expected to happen in June if no deal is reached, according to Treasury Secretary Janet Yellin. When we last faced this fiscal cliff in 2021, Moody’s Analytics predicted that default would mean soaring interest rates and a ripple effect that would rock most financial instruments around the world. The stock market would lose a third of its value, and some $15 trillion worth of household wealth would vanish.
How might we avoid this catastrophe? Some experts suggest that the government could issue premium bonds with extremely high interest rates, or even mint a platinum trillion-dollar coin and deposit it in the Federal Reserve.
Or the government could simply get its fiscal house in order and stop spending money it doesn’t have.
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