Jan 10, 2011
The shootings in Arizona have caused most of the fiscal votes that would have been happened this week to be set aside. The House, for example, has set aside its planned vote on repealing health care reform, and will instead focus on the victims in Tucson and working on what, if anything, can be done to prevent similar tragedies. Even so, decisions on problems like raising the debt ceiling are not far off.
The Debt Ceiling Debate
After running (in many cases, successfully) against federal spending, Tea Party-oriented Republicans signaled that they’re not ready to yield on the debt ceiling, which sets a limit on how much the country can borrow to fund its operations. Appearing on Fox News Sunday, Sen. Rand Paul said he won’t support an increase the $14.3 trillion Federal debt ceiling without receiving major concessions from the Obama administration and the Democratic-led Senate. “I am proposing that we link to raising the debt ceiling — that we link a balanced budget rule, an ironclad rule that they can’t evade.” And he blasted “token spending cuts” as insignificant and unworthy of a debt ceiling deal.
Sen. Rand Paul wants debt ceiling vote tied to ‘ironclad rule’ on budget
This came several days after new House Speaker John Boehner pledged to cut Federal spending by $100 billion per year, reiterating a Republican campaign pledge.
Rep. Paul Ryan, another fiscally conservative Republican, told an audience at the National Press Club Thursday that the ceiling would undoubtedly go up. “Will the debt ceiling be raised? Does it have to be raised? Yes … I want to make sure we get substantial spending cuts and controls in exchange for raising the debt ceiling.”
Ryan hints at debt ceiling strategy
At the Business Insider, conservative blogger Silver Shield calls the debt ceiling debate a “contrived drama” and predicts it will be raised after some political wrangling. “There will be great political drama. The media will be breathlessly cover it. The American people chew their finger nails into nubs, waiting to hear their fate.”
The Contrived Drama Of The Debt Ceiling
The Administration opened the discussion of the debt limit with a letter to Congress from Treasury Secretary Tim Geithner urging legislators to act quickly and saying the U.S. could hit the limits of national borrowing by the end of March. And failing to increasing the $14.3 trillion debt limit, says Senate Majority Leader Harry Reid, is not an option: “We can’t back out on the money we owe the rest of the world,” he said. “We can’t do as the Gingrich crowd did a few years ago, close the government.” The Los Angeles Times, in an editorial, takes a similar tack, arguing that it’s a matter of Debt Before Dishonor: “The time for lawmakers to exercise fiscal restraint,” says the L.A. Times, is when Congress is “voting on budget resolutions, appropriations and tax bills, not when they’re deciding whether to honor America’s debts.”
What would failing to raise the debt ceiling bring about? Bryce Covert, writing on the progressive New Deal 2.0 blog, says it “would force the government to default and could have catastrophic consequences, including a stop in its payments to all government services and a permanent loss in confidence in Treasury debt.”
Then there’s the question of whether we really need a debt ceiling. Annie Lowrey, in Slate, notes that the debt ceiling concept dates back to World War I, and things have changed a lot since then: “All wonks agree: The debt ceiling is not, strictly speaking, a necessary budget tool.”
Chart of the Day
A look back: federal debt as a percentage of the economy, which is a critical indicator of when the debt is starting to have an impact. If current projections hold, debt held by the public will be as large as the total economy in about ten years.
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Fiscal Future Daily is produced by Public Agenda for Choosing Our Fiscal Future, in partnership with the National Academy of Public Administration and with support by the John D. and Catherine T. MacArthur Foundation. The editor in chief is Scott Bittle, with contributors Francie Grace, David White, Jen Vento, Hart Hooton and Tom Watson.