It may seem that writing and, thus, reading about the federal debt limit would be about as interesting as pondering last night’s dishwater. But there is much to be revealed by the ongoing debate over this obscure fiscal provision that carries grave consequences should it be ignored.
The whole shebang casts harsh light yet again on Senate Republican Leader Mitch McConnell, of Louisville, who seems eager to cast the nation economically adrift for reasons that, well, remain a mystery to everyone except, apparently, old Mitch. It provides further evidence that McConnell, not former President Donald J. Trump, is the most destructive force in American politics today and, quite likely, the worst party leader in Senate history.
The debt limit itself is a fairly simple concept. It takes a ton of dough to keep the federal government operating and, since it currently is raising insufficient funds through taxes and assorted fees to feed the monster, it borrows money from bond sales and various sources to keep things humming.
The NKyTribune’s Washington columnist Bill Straub served 11 years as the Frankfort Bureau chief for The Kentucky Post. He also is the former White House/political correspondent for Scripps Howard News Service. A member of the Kentucky Journalism Hall of Fame, he currently resides in Silver Spring, Maryland, and writes frequently about the federal government and politics. Email him at williamgstraub@gmail.comA lot has been made about the federal debt – currently in the neighborhood of $28.8 trillion (yes, a pretty swank neighborhood) — and one of these days it’s going to have to be addressed. But with interest rates still reasonably low and the nation’s needs growing – have you tried traveling on the interstate lately without breaking an axle? – a borrowing we must go.
But there exists a statutory limit on the amount of money the federal government can borrow at any time. That limit must be suspended by Congress every now and then so the government can meet its obligations. In fact, lawmakers have raised or suspended the country’s debt ceiling 78 times since 1960. It results in an occasional tussle – former President Barack Obama, when he was a member of the Senate from Illinois, once nonsensically voted against an increase, a move he later acknowledged was a big mistake). So generally speaking, with folks on both sides aware of the potentially devastating consequences for failing to act, they grumble and swear and suspend the debt limit before they can go about their merry way.
And what are those consequences? Just economic devastation, at least according to the economists, who should know. If the debt limit isn’t suspended, the U.S. reaches a point where it can’t borrow any more money and therefore can’t pay its bills. It would enter into default, ruining the nation’s full faith and credit reputation. The U.S. would be unable to pay its bond holders. Global stock markets would plunge and interest rates would soar. Goldman Sachs has predicted about $175 billion would immediately be withdrawn from the US economy, resulting in an historically deep recession.
Obligations, like Social Security payments and military salaries, would go unmet.
Default has occurred at lest once before, in 1979, as a result of what amounts to an accounting error. That $122 billion miscue was a pittance of the $800 billion debt at the time, but it’s been estimated that the tiny misstep, which was quickly addressed, nonetheless raised the cost of borrowing by 0.6 percent – or about $6 billion a year.
Take my word for it: Default, should it occur, ain’t gonna be pretty.
The current suspension expired on July 31. Treasury Secretary Janey Yellen has stated the nation will lose its ability to borrow money sometime in October if positive action isn’t taken by Sept. 30, the end of the fiscal year. As it is, the Treasury is moving funds around to delay the inevitable for as long as possible.
Now, by this point you may have reached the conclusion this is no way to run a railroad. You would be correct. And it hasn’t always been done this way.
Beginning in 1980, the House operated under what became known as the Gephardt Rule, named after former Rep. Richard Gephardt, D-MO., who would later go on to serve as the chamber’s Democratic leader. The rule held that the statutory debt limit was automatically suspended once Congress completed action on its budget resolution. The Senate never actually opted to follow suit but it had the ability to simply proceed in kind by passing the House-passed resolution.
The Gephardt Rule was eventually kicked to the curb by deficit hawks who thought stricter procedures would result in less spending. They of course turned out to be wrong and the result has proved problematic.
Which carries us to our present state of woe. The House has passed a continuing resolution funding the federal government through Dec. 3. Included is a provision suspending the debt limit through 2022.
Normally, a measure like this would eventually succeed in the Senate, if only after camera-loving lawmakers were provided with an opportunity to fulminate about it for a bit. But McConnell, who, of course, delights in the sobriquet Grim Reaper, has announced that no Senate Republican will vote to suspend the debt limit, explaining – if that’s what you choose to call it – that the responsibility belongs solely to the Democratic majority.
“This is a totally Democratic government,’’ McConnell said during a press availability on Wednesday. “They have an obligation to raise the debt ceiling and they will do it.”
A few things about that.
Democrats hold a majority in the Senate only because Vice President Kamala Harris, a Democrat, serves as presiding officer. Otherwise, it’s evenly split 50-50. And since the GOP can filibuster the House-passed debt limit suspension, the Dems need at least 10 Republican votes to ride it through. That’s not going to happen since no Republican is going to go for it.
Instead, McConnell wants Senate Democrats to attached a suspension provision to a legislative package he opposes – a $3.5 trillion spending bill that, among other things, expands funding for education, health care and childcare support, address global climate change and enhance infrastructure investment.
That bill is due to be considered under reconciliation – a procedure that can’t be filibustered. Under reconciliation, however, the bill could not suspend the debt limit, it can only establish a new, higher debt limit figure above the current ceiling, which is around $28.5 trillion. McConnell, and his fellow Republicans, think they can reap some sort of political advantage from that scenario.
The problem is Democrats haven’t yet lined up the 50 votes needed to pass the $3.5 trillion spending bill. What’s more, according to Rep. John Yarmuth, D-Louisville, chairman of the House Budget Committee, members of his staff have concluded that Democrats “probably” do not have enough time to raise the debt ceiling under reconciliation rules in time to avoid default.
“Budget Committee staff has concluded that the obstacles to amending the existing reconciliation bill are insurmountable and a new reconciliation process to raise the limit probably could not be done in time to stave off a default,” Yarmuth said in an interview with Bloomberg News on Wednesday.
It should be noted that Yarmuth, the lone Democrat in the Kentucky delegation, has previously supported raising the debt limit through reconciliation – urging House Speaker Nancy Pelosi to adopt a limit of a gazillion dollars, a figure that would avoid future spending fights.
So, if Yarmuth is right, the ball is back in Mitch’s court, unless he detects political advantage in watching the nation go broke, in which case we’re all doomed.
This is all so typical McConnell. He makes up self-serving rules as he goes along – remember the Merrick Garland fiasco where he declared Supreme Court nominees don’t get a vote during the final year of a president’s term, changing it to get Justice Amy Coney Barrett confirmed.
For the record, the debt limit was raised two times during the Trump administration, once with Republicans controlling the Senate. During that time, with a Republican in the White House, debt obligations rose by $7.8 trillion.
Suspension was supported each time by Senate Democratic Leader Charles Schumer and Pelosi with little debate. In the past, McConnell has said always insisted on suspension, saying in 2019, “We will raise the debt ceiling because America can’t default. I mean, that would be a disaster.”
Yet, in that strange land called Mitch world, the onus falls entirely on Senate Democrats.
Over the past 61 years, the debt ceiling has been raised or suspended 49 times under Republican presidents and 29 times under Democratic presidents. Republican President Ronald Reagan oversaw the largest number of debt ceiling increases while another GOP President, George W. Bush, who left office just 13 years ago, approved a near doubling of the borrowing cap during his two terms in office.
Republicans own the debt every bit as much, if not more, than Democrats. Yet McConnell sees no problem in abandoning his responsibility to address and bring the nation to the brink of economic catastrophe just so he can exercise his power.
He’s not a legislative genius. He’s a bad joke. And he’s hurting the country.
