The Federal Debt Ceiling: Analyzing the Can Kicked Down the Road

Nov 19, 2013

          If the Obama Administration cannot get the incompetent, stumbling rollout of the Affordable Care Act fixed in the next month or so, we will soon face another game of “economic chicken” between Tea Party Republicans and President Obama. 

          The settlement in October that ended the federal government shutdown and dodged the default of the U.S. Treasury on American bonds settled none of the issues. It simply kicked the can down the road a few months when the Tea Party minority of Republicans will again seek to hold the nation’s economy hostage in order to force the President and the Senate to approve the Tea Party’s legislative agenda. This destructive tactic will be used again because the Tea Party stands no chance of mobilizing a majority vote to pass it through the normal constitutional channels.

          The October federal government shutdown and near federal default on its bonds embarrassed Republicans and demonstrated the dangerous and destructive intentions of the Tea Party. By most accounts, this significantly damaged the Republican “brand” as it prepared for next year’s midterm elections. The national press was full of stories about the Republicans’ radical drift to the right as a result of the civil war within the GOP.  Members of the far right minority in the party seem to have agreed on a suicide pact to take down the Republic Party as well as the national economy if they could not get their way.

          With Obama currently stumbling badly as a result of the embarrassing rollout of the Affordable Care Act, the Tea Party and Republicans are bound to be emboldened in the next battle over funding the federal government and keeping the U.S. Treasury from defaulting on American bonds.  We may be back to where we were in October with Republicans again demanding the abandonment of the Affordable Care Act in return for not destroying the nation’s credit rating and pitching the world economy into chaos. The accompanying shut down of the federal government may be a minor event compared to that likely international economic crisis.

          Since it is highly likely that we are going to face that game of economic chicken and political blackmail again, it is worth going back over some of the facts associated with the debt ceiling and the federal deficit.

          It is important to remember that the U.S. government has had a debt every year of its existence except for one year in the early 1800s. The federal government came into existence with the debts associated with our Revolutionary War.  Carrying that and other debt almost continuously over the centuries certainly did not keep the American economy from growing into the largest and most productive economy in the world that supported one of the highest standards of living in the world. The governments of other developed economies of the world also carry significant debts.

          Strangely enough, the U.S. debt ceiling was originally adopted at the beginning of America’s involvement in World War I to make it easier for the federal government to borrow money to prosecute the war effort without having to repeatedly go back to Congress for a second authorization for already authorized war spending.

          The current debt ceiling legislation, however, creates the possibility of a contradiction in Congressional mandates to the executive branch of government. When Congress passes legislation funding a program, it is ordering the president to operate that program by spending that money. But if the debt ceiling is not raised, Congress is also ordering the president not to fund that program even though Congress has ordered that it be funded.  Which order from Congress is the president supposed to break?

          From 1979 until 1995 Congress avoided this contradiction by adopting a rule that said that when a budget was passed by Congress, the debt ceiling was deemed to have been increased to accommodate that budget. A separate debt ceiling vote was not required. That would appear to be a politically more honest approach to controlling the national debt.

          Since 1940 it is estimated that the U.S. debt ceiling has been increased over 90 times. Republican presidents were in office for 54 of those increases; Democratic presidents for 40 of the increases. The cumulative amount of the debt increases, however, was larger under Democratic presidents.

          When Ronal Reagan, an enthusiastic small government advocate, was in office, the debt ceiling was increased a record 18 times. Obama, so far, has supported only 6 increases, a third as many. Bush the younger supported 7 increases and his dad 9 increases. Nixon supported 8 increases before he resigned in his second term, but Clinton, who balanced the federal budget, supported only 6 debt increases. Carter and LBJ each supported 10 increases.

          For almost all of those 90-plus debt ceiling increases, there was no effort at economic blackmail by either party. Most of the time Congress respected the fact that it and no one else had ordered the spending that required the debt limit to be increased. The thinking was that it would unethical for Congress to order that spending and then vote, after the fact, against paying the bill for what Congress had ordered. The contemporary Tea Party Republicans, however, have no such ethical qualms.

          There is something ironic, if not moronic, about folks, who cloak themselves in the mantel of patriotism, threatening to permanently damage the American economy and America’s standing in the world.  Holding the nation’s financial position hostage while engaging in economic blackmail is hardly the stuff of patriotism. It is the opposite.