Congress seeks (its own) permission to borrow an additional $ 1 billion or $ 2 billion
The task keeps coming back like a penny: Congress must soon raise the debt ceiling again. It will be almost the 100th time that he has done so.
After the Republicans made a big deal on the debt ceiling in 2011 and 2013, disrupting financial markets and nearly pushing the United States into default, the party has partnered with Democrats to raise the debt ceiling – quietly – three times under President Trump.
Now, as the federal government hits the limit again, Senate Republicans are mounting a showdown. They know a debt ceiling bill will need at least 10 GOP votes to pass the chamber, but Republicans have been saying for weeks they will not support a raise. Senatorial Minority Leader Mitch McConnell reiterated Monday this post. “Senate Republicans would support a clean, ongoing resolution that includes appropriate disaster relief and targeted Afghan assistance. We will not support legislation that increases the debt ceiling.”
What is the debt ceiling?
This is the limit on how much the federal government can borrow. Or to be more precise, the limit of the amount that the federal government will be allowed to add to the total of the current accumulated debt of the past generations. Every now and then, Congress votes to increase the limit so that he can continue to borrow.
It’s not in the Constitution – or the Bible
So where does this debt limit come from?
He’s from Congress. It was imposed a century ago, in 1917, at the start of the First World War. It was intended to appease those members of Congress who opposed the war itself (as many German-Americans and Irish-Americans did) “on the go” (one might say today “on our national VISA card “). The original cap – $ 1 billion – was an entirely arbitrary number. But it was a colossal amount of money at the time, more than double what the government spent in 1916. So it seemed safe to cover every eventuality imaginable, even if it raised eyebrows and objections on the part of fiscal conservatives from both parties.
Two decades later, in 1939, as World War II raged elsewhere and threatened to involve the United States, Congress agreed to revise the debt ceiling mechanism to give the Treasury a little more leeway. And since then we have been operating with versions and permutations of this revision.
The last, in 2017, set a limit of $ 22 trillion. But it also allowed a suspension of the limit, under which the United States has since borrowed about $ 6.5 trillion more.
When did the debt ceiling start to matter?
So the federal debt – the accumulation of all the federal government’s annual deficits – reached $ 1 trillion around 1980 and became a very big campaign issue for Ronald Reagan, who was elected that year.
“Today the debt stands at $ 934 billion,” he said in a speech by the Oval Office on February 5, 1981. “Temporary increases or extensions to the debt ceiling have been authorized 21 times in those 10 years, I have been forced to ask for a further increase in the debt ceiling, otherwise the government will not be able to function after mid-February – and I have only been here 16 days. ”
Reagan had idealized the government in decline during its administration – but it is not. Not even close. Expenses have increased, revenues have been reduced by tax cuts. Deficits have continued and increased. The cumulative debt has therefore increased. In fact, the federal debt reached $ 3 trillion in the late 1980s, the only decade in history in which the national debt tripled.
Is the limit a fig leaf or a soccer ball?
Clearly, the limit exists to be raised. But how often can Congress raise it? The answer is: Congress has the power to increase or change the limit whenever it is reached. Of course, the deficit hawks are empowered to oppose a higher limit each time, which makes the raise a political football every time.
And so far the limit has been increased or changed or temporarily suspended 98 different times, according to the Congressional Research Service. For a time in the 1980s and 1990s, the increase was routine, achieved with the passing of the budget resolution of Congress each year. Easy, an afterthought. Not even worthy of interest.
This changed when control of Congress passed to the GOP in 1994 and Newt Gingrich of Georgia became Speaker of the House. Gingrich represented an emerging generation of Conservative activists in the House calling for a new tax order. They wanted a spotlight on the debt and a painful battle to raise the debt ceiling. And somehow, they’ve fought such a battle every time they’ve had one since, albeit most of the time when Democrats were in the White House.
What if Congress doesn’t raise the debt ceiling?
If the federal government reaches this limit, the treasury moves money for a few weeks to cover the cash flow deficit. They are what the treasure officials call for “extraordinary measures” – but they don’t go any further, and on September 8, Treasury Secretary Janet Yellen announced that these measures would end in October.
It would leave the government with no money to deal with the payroll and pay for government purchases and send all those checks for social security and medicare and all other forms of federal obligation.
Among those waiting to be paid are holders of treasury bills and other securities, some of which are maturing as we speak. In particular, new debts are necessary to meet these obligations, because non-compliance would constitute a default in payment.
The United States has never defaulted on its maturing bonds, which is one of the main reasons the United States can borrow money easily and at low rates. Failure to pay would make borrowing much more difficult and costly in the future.
New borrowing authority is therefore necessary for the federal government’s cash flow to continue. Without it, at least part of government must close its doors, as we saw during the budget disputes of 2011 and 2013 – and for longer periods in 1995 and 1996.
Can the government just get rid of the debt ceiling to avoid these fights?
Arguably, losing the limit would simply remove the fig leaf that has hidden the current practice of ever-larger borrowing. But if we assume that it is politically unpleasant to increase the limit, it seems really unpleasant to eliminate it altogether.
Voters might just notice and they might just view it as fiscal irresponsibility, even if they don’t like the government to shut down. They also don’t like the idea of a government with no limits on its borrowing.
And it’s important to say that there are a lot of lawmakers who like the debt ceiling, both as a restriction on the growth of federal spending and as a chance to tie the controversial things they want to do to something. something that people, at the end of the day, have to vote for.
So how do they vote to increase it?
Various stratagems have been devised to increase the debt ceiling without too much notice or electoral fallout. But since 1995, when Gingrich got rid of the rule of thumb that “considered” the limit increased with the passage of each year’s budget, increasing the limit has often been a heavy burden. It may be the fiscally responsible thing to do, but it seems stupendous to many voters. The incumbent lawmakers do not want to do it under the gaze of potential challengers in the upcoming primaries and fall elections.
In recent years, Congress has decided to suspend the limit for a period of time rather than increasing it. The practical effect is the same, and the delay may seem more elastic. But this grape leaf style requires some bipartisan cooperation, or at least patience. It may be easier when control of the White House and Capitol Hill is shared between the parties, giving both parties some sort of shared responsibility to prevent default.
This year, with Democrats at least nominally controlling Congress and the White House, they are left alone with the bag. Republicans know they don’t have to help, and they’ve signaled they won’t. This gives them yet another opportunity to castigate Democratic budget proposals as being too expensive.
Democratic leaders set the increase in the debt ceiling to legislation likely to appeal to Republicans (and some fiscally conservative Democrats): a bill that funds the government until December 3, 2021 and includes funding for emergency disaster relief.
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