The fight over Department of Homeland Security funding has just ended and the next showdown over the country’s finances is already underway. The temporary suspension of the debt ceiling will soon expire, and the countdown to default will begin March 16.
The debt ceiling is a statutory limit on the amount of debt the Treasury can issue to finance the government’s obligations, which include everything from issuing Social Security checks, paying federal employees, and the interest owed on debt. Battles over the debt ceiling in Congress have become more frequent in recent years, and critics have dismissed the limit as an antiquated rule that does more harm than good.
Treasury Secretary Jack Lew announced that he will use temporary measures to finance government activities after America hits the debt ceiling in mid-March. The Congressional Budget Office predicts this will delay a potential default until October or November 2015.
Proponents of eliminating the debt ceiling argue that since Congress already authorizes the budget, the Treasury should not need congressional approval to issue debt. Raising the debt ceiling does not constitute a debt increase, so critics see it as an unnecessary financial risk.
President Obama himself put forward a plan that would have permanently authorized him to unilaterally raise the debt ceiling unless Congress directly voted to stop him. Even then, Congress would have to overcome a veto.
Congressional control over the debt ceiling is an essential part of government’s budgeting and financing process, and should not be ceded to the president. Congress has the exclusive constitutional authority“[t]o borrow Money on the credit of the United States.” Prior to enactment of a debt ceiling in 1917, Congress had to analyze and authorize the issuance of securities to fund individual measures.
The debt ceiling was passed to simplify the issuance of debt and maintain Congress’s control over the country’s finances. Unless Congress begins to regularly authorize securities for individual programs, it will have to continue passing debt limit increases to remain within its constitutional boundaries.
A limit on debt forces Congress to check the growth of federal spending. The government has grown tremendously not only since 1917, but also over the past 6 years. Under President Obama’s latest budget, deficits are scheduled to grow to over $1 trillion in a decade. High debt levels are detrimental to growth because the government is using funds that would otherwise be used by the private sector. Furthermore, as interest rates rise to historical norms of around 5 percent, interest payments to service the debt will consume an increasingly large share of the federal budget.
Congress could raise the debt ceiling so high that the United States will never reach it. But allowing the debt to increase is politically unpopular, and the ceiling forces Congress to publicly acknowledge the growth in debt and pass legislation to increase it. Holding a politically contentious vote ensures a healthy debate over the state of the country’s finances. The largest programs in the federal budget, entitlements, run on autopilot spending, making the debt ceiling a rare opportunity to discuss their reform.
The growth in federal debt since President Obama took office has justifiably increased the intensity of recent debt ceiling fights. Since January 2009, the public debt has grown from $10.6 trillion to $18.1 trillion, and the debt limit has been increased six times and suspended twice. The Government Accountability Office, the CBO, and the Congressional Research Service have all noted the government’s unsustainable long-term fiscal path.
Congress can use this debt debate as an opportunity to pass reform. The budget saga in 2011 ended with the passage of the Budget Control Act, resulting in some savings for the taxpayer. Bouncing from debt ceiling fights to budget battles may seem burdensome, but keeping the debt ceiling under congressional control might help check spending growth.
Matthew Sabas is a research associate at Economics21 at the Manhattan Institute for Policy Research.
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