New estimates from the Bipartisan Policy Center suggest that the federal government could run out of money and hit its self-imposed debt limit sometime in September. The Trump administration has been urging Congress to raise the borrowing limit for months, and prominent Senate Republicans are warning of economic doom if the government suddenly finds itself unable to pay its bills.
So what is Congress doing? Not much. It’s scheduled to go on recess for most of next month and not return until after Labor Day, at which point a fiscal crisis could be a matter of days away. And the chances of getting something done before then don’t look good, as disputes about spending are splitting both parties. As it happens, we’re on course to hit the debt ceiling at virtually the same time that Congress needs to agree on a spending plan for the next fiscal year, and as has become typical, the one thing that should not become a political fight — raising the debt limit — is getting pulled into other issues in flurry of legislative hostage-taking.
We say enough with the whole thing. When Washington went through this same dance on multiple occasions during Barack Obama’s presidency, we argued that Congress should abolish the debt ceiling once and for all. Now that Donald Trump is president, we still think it needs to go. As a means to instill fiscal discipline, the debt ceiling has been a failure. As a means to foster hypocrisy and partisan gamesmanship, it has been a tragic success.
When the debt ceiling needed to be raised back in 2006, Mr. Obama made a high-minded speech on the Senate floor about then-President George W. Bush’s “leadership failure.” When he was president and Republicans suddenly objected to raising the debt ceiling, he called them “dysfunctional” and “reckless.” Last month, acting White House Chief of Staff Mick Mulvaney criticized House Speaker Nancy Pelosi for demanding spending concessions as a condition of supporting a debt ceiling increase (a charge she denies), but when he was a member of Congress and Mr. Obama was in the White House, Mr. Mulvaney was a prominent member of the Freedom Caucus, which routinely held debt ceiling votes hostage to further its far-right fiscal policy.
No one quite knows what would happen if Congress and the White House fail to raise the debt ceiling. Through it all, the U.S. has always managed to do so in time (often thanks to some deft maneuvering by the Treasury Department to buy a few extra weeks or months). But the general consensus is that any breach in the ability of the federal government to pay its bills would set off financial panic and a downgrade in the federal government’s credit rating. That would mean higher costs for borrowing not only for the federal government but also for businesses and consumers as the effects of the breach trickled through the economy. Even the uncertainty created by the perennial gamesmanship was enough to prompt Standard & Poor’s to downgrade the federal government’s credit rating for the first time in 2011, and last year, Fitch warned that even if the government continues paying off its bonds, failure to raise the ceiling would likely result in a downgrade from AAA status.
The problem with the debt ceiling (a relic of early 20th century fiscal management) is that it doesn’t stop the federal government from spending money. It merely limits the federal government’s ability to pay the bills Congress and the president have already incurred. If we’re going to have a conversation about the mounting national debt, the moment to do so is when Congress is passing the budget (or, these days, a continuing resolution), not when the time comes to authorize the borrowing those budgets necessitate.
(Late 2017, when President Trump and the then-Republican Congress were passing a massive tax cut tilted toward the wealthy and corporations would have been a great time for the discussion, too, but the GOP deficit hawks were oddly silent back then. It’s worth noting, though, that a major reason the nation is poised to hit the debt limit sooner than expected, according to the Bipartisan Policy Center, is a sharp dropoff in corporate tax receipts, despite the continued economic expansion.)