By Steve Levy Friday, 03 January 2025 12:42 PM EST Current | Bio | Archive
The most recent budget extension drama played out on Capitol Hill highlighted the continued controversy revolving around the debt ceiling.
If we as a nation are to solve our enormous debt and spending dilemma, we must first understand what the debt ceiling is — and is not.
The mainstream media and elected officials on both sides of the political aisle have often given the public a false impression of what the debt ceiling votes actually do.
The common misconception is that a vote to increase the debt ceiling is a vote to spend more tax dollars. It is not.
The Department of Treasury website confirms this quite clearly:
The debt limit does not authorize new spending commitments. It simply allows the government to finance existing legal obligations that congresses and presidents of both parties have made in the past. Failing to increase the debt limit would have catastrophic economic consequences. It would cause the government to default on its legal obligations — an unprecedented event in American history that would precipitate another financial crisis and threaten jobs and savings of everyday Americans.
In other words, voting to raise the debt ceiling does NOT increase spending, and voting against it does NOT rescind any spending.
The spending was already authorized by previous votes of Congress.
A default on paying our debt would obliterate our standing as the safest currency in the world. That would have worldwide investors running for the exits and taking their money out of American markets and institutions.
So why has there been so much controversy about the debt ceiling in the past? It’s because many members of Congress fear that a vote to raise the debt limit would be interpreted by the folks back home as voting for more reckless spending.
And there are others, less concerned about the fiscal imagery, who wanted to hold their vote out as leverage to modify the budget to their liking.
President-elect Donald Trump preferred the debt ceiling matter be pushed out several years for two reasons.
First, he knew that, come March, the issue would be in his lap, and he is reluctant to give the appearance that he would be spending recklessly by supporting the raising of the debt limit (something he understands has to be done for the government to continue to function and to prevent America’s default).
But he was also leery of giving Democrats leverage to hold out on extending the debt ceiling next year unless they get their goodies included within the budget.
If the debt ceiling is handled through the reconciliation process, which is doable, that would only require 50 votes in the Senate, rather than the traditional 60 that relates to nonfiscal matters. Doing the math, the Republicans would not need Democratic votes, but that’s assuming the Republicans can hold together. No guarantee.
Trump loathes the optics of having the GOP extend the ceiling while the loyal opposition votes a resounding no, all the while seeking to label their conservative counterparts — who railed against raising the ceiling in the past — as hypocrites.
Democrats are split on the issue. Some of the biggest spenders, such as Elizabeth Warren, want to do away with the ceiling altogether so that they can continue to spend like drunken sailors without giving the other side leverage to force cuts.
Yet, other Democrats want to maintain the debt ceiling vote so that they themselves can hold out in order to get more spending into the budget when the Republicans take control of both houses and the presidency.
Debt ceilings have been meaningless since Congress pays no heed to them when they’re preparing their spending plans. They would spend whatever they wanted, knowing that down the line they would be forced to expand the debt ceiling to whatever level was needed to accommodate the increased spending they authorized months earlier.
So why continue to go through the charade every year? Both Trump and Warren are correct in wishing to push out these debt ceiling votes far out into the future, though for different reasons.
Ultimately, it’s the votes that are cast in developing the annual budget that count. Thus, if conservatives want spending controlled, the answer lies in enacting a balanced budget amendment.
Every state and local government around the country by law must balance their budget. The federal government is the only public entity that does not. That should end immediately.
As noted in our Center for Cost Effective Government’s white paper on spending caps, these spending limitations work. They force prioritization.
The fiscal hawks within the Republican caucus should seek the ultimate deal of getting rid of the debt limit charade by linking it to a requirement that a balanced budget amendment be enacted.
Elon Musk and Vivek Ramaswami may come up with buckets full of logical spending cuts, but they don’t have the authority to implement them. A balanced budget requirement would force many of those cuts to be implemented by a recalcitrant big spending Congress.