As the dreaded day of default predicted by many approaches, Congress found yet another way to kick the can down the road a bit, averting the potential disaster – for now. Senate Minority Leader Mitch McConnell (R-KY) offered Democrats a deal to end the legislative standoff on the debt ceiling Wednesday, October 6, and they took it. Republicans will help raise the debt limit – but only to a set number based on current spending levels, and it’s only good through December.
Debt Ceiling Chicken
Democrats want the ability to spend and borrow unrestrained – think the multi-trillion-dollar “infrastructure” bills, which include very little actual infrastructure spending, relative to the total amount – without having to worry about that pesky debt ceiling. Luckily for them, the GOP is willing to let them, but for a price.
Sen. McConnell has made it clear that if the Democrats want to suspend the debt limit, they’ll have to use reconciliation to do so. Ah, but that takes time, they say. What if the nation defaults before it can be accomplished – or what if America’s credit rating is downgraded in anticipation of that default? For this, it seems, Senate Republicans are willing to offer a way out. Pass a debt limit increase through the normal legislative process to avert a financial disaster. But there are a few caveats. The ceiling will only be raised, not suspended, and only as high as would allow spending at current levels through December of this year.
Then in December – when government funding runs out anyway, thanks to the most recent continuing resolution (CR) – the issue must be addressed again.
The Democrats agreed to take the deal – and that vote is expected soon – but everyone can see that this merely delays the inevitable conflict: Republicans want their opponents to address the debt limit through the reconciliation process to slow down or even halt the Biden legislative agenda. Democrats, of course, don’t want to sacrifice any of their power to pass spending bills without the GOP down the line.
Kick That Can – Who Cares About the Cost?
The state of the U.S. economy is abysmal. The nation is so far in debt that even paying the interest payment on the current debt – $378 billion in 2021 – requires more borrowing. What would one call an individual who borrowed constantly, even paying the debts by taking out more debt, with no end in sight? Financially doomed – and probably foolish, as well.
That sad spiral is precisely where America’s finances are, but unlike the guy who’s likely to start losing everything he owns, the United States is offered seemingly unending credit. Emphasis on seemingly. Someday, likely when the interest alone on the debt is more than the annual budget otherwise, the bill will come due, and the nation already can’t afford to pay it.
The debt limit was instituted to prevent this financial spiral – if only it had worked. Politicians like to play the blame game. Democrats are saying this is to pay Trump’s debts. Republicans call out previous Democratic administrations. Both sides are correct. It’s estimated that 97% of the current debt is from previous administrations. However, believing that this means giving the current administration unrestrained power to borrow to “pay it back” is thinking merely one layer deep. Of course the majority of the national debt is from previous administrations. And in the future, the Biden White House will be one of those – especially when so much of the spending this administration hopes to get has nothing to do with paying down the national debt and everything to do with new programs to increase it.
So, has Congress agreed to press pause on its game of debt ceiling chicken? Sure – for now. We’ll see come December how much good it has done.
~ Read more from James Fite.