Full Faith and Credit
So we don’t know when it became the established practice to put the debt ceiling to a vote. It’s one of those rules that just seemed to come into being, like not stealing third base when your team is up 8-0, wearing wedding rings on the left hand and yielding to the right except while driving in New Jersey.
The Constitution does, however, require the United States to pay its debts. And the guy we put in charge of keeping track of the money, Ben Bernanke, is predicting a global economic catastrophe if the debt ceiling is not raised by August 2.
Bernanke is really worked up about this. His beard twitched slightly and he almost changed his expression when he issued his warning yesterday about a fiscal apocalypse. Moody’s, the ratings specialists who thought sub-prime mortgages were a great investment, also weighed in with an ominous hint that its AAA credit rating for the U.S. is about to go the way of the dinosaurs. So, clearly, we’re in big trouble if nothing is done.
Congress, of course, is busy doing nothing. The Congressional leadership and President Obama have been engaged in a steel cage death match for the past few weeks, hacking away at each other with rhetorical swords and wrestling for maximum political leverage. As this is being written, the only thing they’ve accomplished is to back each other into corners. They’re running out of corners and time.
The fiscal hole the U.S. currently resides in is so big–$14.3 trillion and counting–that nobody is really talking about balancing the budget and reducing the debt at this point. The entire argument is focused on reducing the size of the increase to the debt over the next few years. If you don’t think this is true, check out the 2012 federal budget Congress is quietly working on while everyone screams about the debt ceiling. Without a doubt, the final product will feature a deficit in excess of $1 trillion. So we are adding mountains of moolah to the debt while we debate how to contain it.
Since it will take a miracle to resolve the partisan dispute over taxes vs. spending in time to have a meaningful bill on the president’s desk before the U.S. runs out of cash on Aug. 2, we thought we’d make a modest proposal that could give both sides an opportunity to back down gracefully. Here it is:
1. Congress will agree to raise the debt ceiling by $2.5 trillion, as requested by the president, with no strings attached.
2. Congress will pass a Constitutional Amendment setting a fixed limit on the percentage of debt we can carry vs. the overall GDP of the United States. This percentage will be prohibited from exceeding the level that exists if and when we hit the new debt ceiling.
Simply put, the amendment will mandate that this is the LAST time we will ever raise the debt ceiling. It will force our leaders to enact meaningful deficit reduction well in advance of the possibility that we will exceed the new ceiling, which on our current trajectory of spending will happen in less than two years.
Tying the debt ceiling to a fixed percentage of GDP will have the added benefit of providing more flexibility to the process than an amendment mandating a balanced budget. Assuming our economy eventually expands and GDP grows again, we can chart a softer withdrawal from our national addiction to debt than the draconian cold-turkey cuts which would be induced by a balanced budget requirement.
In a season of drawing lines in the sand and endless posturing by politicians, it’s time for all of us to draw a line in the one place it can’t be erased, the document that governs those who govern us.