The approach of the debt ceiling by late February, when the US supposedly can’t pay its bills, has brought the “man bites dog” attention seekers out of the woodwork. Former government lawyers write in the Wall Street Journal that concern is silly because the law mandates that revenues be used to pay interest on the debt first. True, but that means that most other programs are drastically cut — no social security checks, etc — while the economy, deprived of a quick $300 billion per MONTH (over 2% of GDP) goes into cardiac arrest.
How about having the Treasury mint a trillion-dollar platinum coin? Like just paying interest on the debt, it’s legal but silly. The Treasury could deposit the coin at the Fed and create a trillion-dollar credit in its account there against which it could write checks to pay its bills. If the Fed offsets the Treasury draw on its “platinum” account by selling assets from its $2.8 trillion balance sheet, as it probably would do to avoid inflation, the platinum coin caper becomes a gimmick to have the Fed drain funds from households and businesses to provide funds to the Treasury to pay its bills. That’s no different from a direct tax increase on households and businesses to finance government spending.
The fact that there exist silly gimmicks to get around the silly debt ceiling, whereby the federal government can pay its bills but won’t do so, shouldn’t distract from confronting the basic reality.
The Congress needs to undertake, and the president needs to support, a major fiscal initiative like the one spelled out over two years ago by the Simpson-Bowles bipartisan debt commission that was created by the president: Fund tax rate reductions by phasing out tax expenditures (loopholes) and make structural adjustments on outlays, especially entitlements, that reduce deficits to a level consistent with a gradual stabilization and eventual reduction of the ratio of federal debt to GDP. That ratio is currently 73% and it can be kept there and put on an eventual downward glide path by halving the budget deficit to $500 billion per year and keeping it there.
How about the Republicans accept enough increase in the debt ceiling to allow time to come up with an actual budget?
That would mean the Senate would have to actually pass a budget so that there can be a conference committee to hammer out an actual budget (you know, the normal, statutory budget process).
No more debt ceiling increases until there’s a budget. Say it and mean it. Put it in the resolution to raise the ceiling – no more continuing resolutions, no more debt increases until there’s a budget.
Why not? The GOP can give the Senate another month or two. But given the fact that the debt ceiling deadline is already more than a month away such an act is not actually necessary.
our fiscal reality is that congress passed unfunded spending bills that the Treasury is compelled by law to follow, and at the same time refuse to allow the debt ceiling to rise to meet those obligations…if they didnt want to spend, they should have dealt with that in the budget process…
if charge an expenditure, you cant come back to the creditor at a later date and say “sorry, i hit my limit, you wont get padi”
The last time both houses of Congress passed a budget was three years ago. Senate refuses to pass a budget – instead they pass a continuing resolution maintaining current spending levels, then send it to the House with the message “Pass this, or we’ll make sure you are blamed for shutting down the govt.”
If that was the exact truth how can spending have gone up as much as it did?
I probably shouldn’t have referred to current “levels” – the spending appropriations that have been continued have built-in increases; they are a rising baseline. Plus there are alway special or emergency appropriations, which usually aren’t the subject of much discussion in the news.
The big increase in spending was the 28% increase from fiscal 2007 to fiscal 2009, in response to the financial crisis. This set a new baseline. The Senate has managed to continue these levels by not passing a budget that would go into conference commitee to be negotiated against the budgets the House has passed.
Instead, the Senate passes continuing resolutions and sends them to the House with the implicit message, “Pass this, or we’ll make sure you are blamed for shutting down the government.”
Instead, the Senate passes continuing resolutions and sends them to the House with the implicit message, “Pass this, or we’ll make sure you are blamed for shutting down the government.”
The House has a choice. It can send up a budget and demand that the Senate deal with it. The voters are not as stupid as you make them out to be. If the House is clear about the process it has many ways to make life miserable for the cowards in the Senate.
But the issue is not the differences between the House and Senate but the fact that there is hardly any difference between the typical Republican and Democrat when it comes to the issue of government. Both sides have voted to expand the size of government and have added to the massive federal payrolls as they have increased regulations and grown programs that do not comply with the Constitution. The problems run deep and will not be solved as long as the mainstream parties are still running things.
The Congress needs to undertake, and the president needs to support, a major fiscal initiative like the one spelled out over two years ago by the Simpson-Bowles bipartisan debt commission that was created by the president: Fund tax rate reductions by phasing out tax expenditures (loopholes) and make structural adjustments on outlays, especially entitlements, that reduce deficits to a level consistent with a gradual stabilization and eventual reduction of the ratio of federal debt to GDP. That ratio is currently 73% and it can be kept there and put on an eventual downward glide path by halving the budget deficit to $500 billion per year and keeping it there.
Taxes and regulatory compliance costs have to come down if the US is ever to grow its GDP in real terms by enough to offset the debt problem. But without entitlement and defense cuts there will be no way to finally deal with the unfunded liability problem.