WASHINGTON–If there’s one thing Republicans and Democrats can agree on in the current debt-ceiling standoff, it’s that the nation’s legal borrowing cap has failed in its primary goal: limiting the nation’s debt.
After all, how can anyone argue that the debt ceiling has served to rein in federal borrowing, when the cap has been lifted at least 80 times and the U.S. government is in the red to the tune of about $14.3 trillion?
“The real impact in limiting spending is really questionable,” said Sen. Richard Blumenthal, D-Conn., who as a freshman senator is one of the few lawmakers who has never had to vote on a debt-ceiling increase before.
Indeed, some lawmakers and budget watchdogs say the current crisis should prompt a broader debate over whether the debt-ceiling is a well-intentioned policy gone terribly wrong, or a still-useful tool that needs to be tweaked.
“As a mechanism for controlling the debt it obviously a manifest failure,” said Rep. Jim Himes, a 4th District Democrat and former Wall Street investment banker. “You’ve got this thing which is useless, but very dangerous.”
Until now, Himes noted, the debt ceiling has only be used “for small stakes political poker.” But the current crisis involves a much bigger gamble.
Congress faces an Aug. 2 deadline, at which point Treasury officials have said they will not have enough money to pay the U.S.’s current financial obligations and will be at risk of defaulting. Despite that deadline, lawmakers remained at loggerheads on Tuesday over a debt-reduction package that would pave the way for a debt-limit hike.
And now that Congress has edged this close to a default, lawmakers may be tempted to replay this high-stakes game of chicken each and every time a new increase is needed.
“I don’t know how we will ever return to a time where the various parties don’t take gambles with it, because once the ice is broken on these things, it tends to be tit for tat,” said Joshua Gordon, policy director at the Concord Coalition, a nonpartisan advocacy group that promotes responsible fiscal policy. “And that doesn’t bode well for the nation’s long-term fiscal or financial stability.”
Of course, if you think the current debt-ceiling stalemate is bad, imagine this: Congress used to vote on each individual loan the U.S. Treasury took out and debate every time the government wanted to issue new bonds, according to a congressional report on the history of the debt ceiling.
By the time World War I rolled around, that didn’t make too much sense anymore. So lawmakers gave the Treasury Department more leeway in 1917 to help fund that military conflict. After another tweak or two, the debt ceiling, as we now know it, was in place by 1939.
The debt ceiling is a cap on the legal authority of Treasury to borrow money. It was envisioned as a way to give federal officials a freer hand to manage U.S. debt, but still allow Congress to keep a grip on the federal purse.
One author of the debt ceiling wrote at the time that it was supposed to express “a national devotion to the idea of thrift” and to sound management of the nation’s finances.
But as it was raised over and over again–18 times, for example, during President Ronald Reagan’s two terms in the White House–that vision seems quaint at best.
Sen. Joseph Lieberman, a Connecticut independent, said it still serves a useful “educational” purpose, by focusing the attention of lawmakers and the public on the nation’s fiscal state.
“What a place we’ve come to when, if we’re not able to borrow, our government basically can’t function,” Lieberman said. “We’ve put ourselves so much into the hole that 40 cents of every dollar we’ve got to borrow.”
Lieberman also noted that the looming deadline on the debt limit has forced lawmakers to try to right the nation’s fiscal ship, even if that’s been a messy and so far, unproductive, process.
Still, Lieberman conceded that the debt ceiling has often been used more to score political points than to enact fiscal restraint. Indeed, in the current debate, some of the most forceful advocates of a “clean” debt ceiling vote-one that has no other budget cuts attached–are Democrats who voted “no” in the past when it was a Republican administration asking for the increase.
For example, in 2004, when George W. Bush was president, both Reps. Rosa DeLauro, D-3rd District, and John Larson, D-1st District, voted against increasing the debt ceiling. The three other members of the U.S. House from Connecticut at the time were Republicans, and they all voted yes. In the Senate, Lieberman and then-Sen. Chris Dodd, both Democrats at the time, also voted no. (Lieberman has since switched to become an independent.)
“You tend to want to pressure the administration in power if you’re out of power, to be honest,” Lieberman said.
Gordon, of the Concord Coalition, said the debt ceiling is “always an embarrassing vote.” But embarrassment hasn’t been enough to make it really work as a fiscal break.
“At this point,” Gordon added, “it’s outlived its usefulness.” He said it’s become “very disconnected about good fiscal choices for the future” and is now possibly more dangerous than beneficial because of the current brinksmanship.
Himes echoed that sentiment. “We ought to either do away with it or at least make the process honest,” he said.
One possible fix, Himes suggested, would be to require lawmakers to approve an incremental debt-ceiling increase any time Congress passes new legislation that will either hike spending or cut taxes-and thereby add to the national debt.
“Right now everybody gets to vote for all the bills they love that spend more and tax less,” he noted, “and then they turn around and vote against the debt ceiling.”