Congress is seeking (its own) permission to borrow another trillion or two
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The task keeps coming back like a bad penny: Congress soon must raise the debt ceiling again. It will be almost the 100th time it has done so.
After Republicans made a big issue over the debt ceiling in 2011 and 2013, roiling financial markets and nearly pushing the United States into default, the party partnered with Democrats to raise the debt ceiling — without much ado — three times under President Trump.
Now, with the federal government bumping up against the limit once again, Senate Republicans are setting up a showdown. They know a debt ceiling bill will need at least 10 GOP votes to pass the chamber, yet Republicans have been saying for weeks that they will not support an increase. Senate Minority Leader Mitch McConnell on Monday reiterated this position. "Senate Republicans would support a clean continuing resolution that includes appropriate disaster relief and targeted Afghan assistance. We will not support legislation that raises the debt limit."
What is the debt ceiling?
It's the limit on how much money the federal government can borrow. Or to be more precise, the limit on how much the federal government will be allowed to add to the total of cumulative debt outstanding from generations past. Every so often, Congress votes to raise the limit so it can continue borrowing.
It's not in the Constitution — or the Bible
So where did it this debt limit come from?
It came from Congress. It was imposed a century ago, in 1917, at the beginning of World War I. It was meant to placate those members of Congress who either opposed the war itself (as many German-Americans and Irish-Americans did) or opposed putting its cost "on the cuff" (today we might say "on our national VISA card"). The original ceiling — $1 billion — was an entirely arbitrary number. But it represented a stupendous amount of money at the time, more than twice what the government had spent in 1916. So it seemed sure to cover any imaginable contingencies, even as it raised eyebrows and objections from fiscal conservatives in both parties.
Two decades later, in 1939, with World War II raging elsewhere and threatening to involve the U.S., Congress agreed to revise the debt ceiling mechanism to give the Treasury a bit more leeway. And we have been operating with versions and permutations of that revision ever since.
The latest, in 2017, set a limit of $22 trillion. But it also allowed for a suspension of the limit, under which the U.S. has since borrowed roughly $6.5 trillion more.
When did the debt ceiling start to matter?
So the federal debt — the accumulation of all the annual deficits of the federal government — reached $1 trillion around 1980 and became a very big campaign issue for Ronald Reagan, who got elected that year.
"Today the debt is $934 billion," he said in a speech from the Oval Office on February 5, 1981. "So-called temporary increases or extensions in the debt ceiling have been allowed 21 times in these 10 years, and now I've been forced to ask for another increase in the debt ceiling or the government will be unable to function past the middle of February — and I've only been here 16 days."
Reagan had idealized government declining during his administration — but it did not. Not even close. Spending grew, revenues were reduced by tax cuts. Deficits continued and expanded. So the cumulative debt got bigger. In fact, the federal debt reached $3 trillion by the end of the 1980s — still the only decade in history in which the national debt tripled.
Is the limit a fig leaf — or a football?
Clearly, the limit exists to be raised. But how often can Congress raise it? The answer is: Congress is empowered to raise or otherwise modify the limit whenever it's reached. Of course, deficit hawks are empowered to object to a higher limit every time, which makes the increase a political football every time.
And so far, the limit has been raised or modified or temporarily suspended 98 separate times, according to the Congressional Research Service. For a time in the 1980s and 1990s, the raise was routine, achieved with the adoption of each year's congressional budget resolution. Easy, an afterthought. Not even newsworthy.
That changed when control of Congress flipped to the GOP in 1994 and Newt Gingrich of Georgia became House Speaker. Gingrich represented an emergent generation of militant conservatives in the House who were demanding a new fiscal order. They wanted a spotlight on the debt and a painful battle to raise the debt ceiling. And in one way or another, they have waged such a battle every chance they have had since, although mostly when Democrats were in the White House.
What happens if Congress does not raise the debt ceiling?
If the federal government does hit that limit, the Treasury moves money around for a few weeks to cover the shortfall in cash flow. They're what Treasury officials call "extraordinary measures" — but they only go so far, and on Sept. 8, Treasury Secretary Janet Yellen announced these measures would run out in October.
That would leave the government without the money to meet the payroll and pay for government purchases and send out all those checks for Social Security and Medicare and all other forms of federal obligation.
Among those waiting to be paid are the holders of Treasury bonds and other securities, some of which are maturing as we speak. New debt is necessary to meet these obligations in particular, because failure to do so would constitute default.
The U.S. has never defaulted on its maturing obligations, which is a major reason the U.S. can borrow money readily and at low rates. Default would make it far more difficult and expensive to borrow in the future.
So new borrowing authority is required so that the cash flow of the federal government can continue. Without it, at least parts of the government must shut down, as we saw happen in the budget disputes of 2011 and 2013 — and for longer periods back 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 concealed the ongoing practice of ever-greater borrowing. But if we assume it's politically unpalatable to raise the limit, it seems truly distasteful to eliminate it entirely.
Voters might just notice and they might just take that as fiscal irresponsibility, even though they don't like the government shutting 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 plenty of legislators who like the debt ceiling, both as a restraint on the growth of federal spending and as a chance to tie controversial stuff they want done to something that people, in the end, have to vote for.
So how do they vote to raise it?
Various stratagems have been devised to get the debt limit raised without too much notice or electoral fallout. But since 1995, when Gingrich got rid of the handy rule that "deemed" the limit raised with the passage of each year's budget, raising the limit has often been a heavy lift. It may be the fiscally responsible thing to do, but it looks profligate to many voters. Incumbent legislators don't want to do it under the gaze of prospective challengers in upcoming primaries and fall elections.
In recent years, Congress has taken to suspending the limit for a period of time rather than raising it. The practical effect is the same and the deadline can seem more elastic. But this style of fig leaf requires a measure of bipartisan cooperation, or at least forbearance. This can be easier when control of the White House and Capitol Hill are split between the parties, giving both sides something of a shared responsibility to forestall default.
This year, with Democrats at least nominally in control of Congress and the White House, they are left holding the bag alone. Republicans know they don't have to help and they have signaled that they will not. This gives them another opportunity to castigate the Democratic budget proposals as too expensive.
Democratic leaders have attached the debt ceiling increase to legislation that may hold some appeal to Republicans (and some fiscally conservative Democrats): a bill that funds the government until Dec. 3, 2021 and includes emergency disaster relief funding.