Debt limit: A political chasm over fiscal responsibility
| Washington
As the United States hurtles toward default on its record debt, Tennessee听Rep. Tim Burchett is eating peanut butter and jelly sandwiches at his desk for dinner.
He doesn鈥檛 come from money.听His听parents 鈥� survivors of the Depression 鈥� lived within their means. So has his state, which is constitutionally mandated to balance its budget. Now he鈥檚 calling for the nation to do likewise, armed with a squirt bottle of Welch鈥檚 grape jelly in a town where dining out is de rigueur.听
Congressman听Burchett was one of four House Republicans who voted against a GOP bill two weeks ago that would raise the national debt limit by $1.5 trillion in exchange for spending cuts to help get the nation鈥檚 fiscal house in order.听The debt currently stands at听.
Why We Wrote This
A story focused onDebt limit negotiations have often been framed around the espoused goal of compelling greater fiscal discipline. But this round is particularly high-stakes, with each side digging in.
鈥淚 did not vote for [raising the debt limit] under Trump, and I thought it鈥檇 be very disingenuous if I did it here,鈥� says Representative Burchett in a phone interview, pointing out that even under this latest Republican plan, the debt would continue to grow by about $1.5 trillion each year. 鈥淚t鈥檚 going to destroy this country.鈥�
Tomorrow congressional leaders will meet with President Joe Biden at the White House to try to avert a default听on the debt, which would occur if the limit isn鈥檛 raised and could have long-term consequences for the U.S. economy and its global standing. The deeper issue is how to bring spending and revenue into better balance, as America鈥檚 rising debt 鈥� blamed on everything from the war on terror to Trump tax cuts to pandemic spending 鈥� exceeds World War II proportions for the first time.听听
鈥淪omebody needs to go in there with a plan 鈥� and a plan that is realistic, not a plan that is ideological,鈥� says former Sen. Kent Conrad, a North Dakota Democrat who helped negotiate a resolution to the last major debt limit crisis in 2011 as Senate Budget Committee chairman.听
鈥淩epublicans don鈥檛 want to raise revenue. Democrats don鈥檛 want to touch entitlements. The hard reality is you have to have some of both,鈥� adds Mr. Conrad, who now co-chairs the Bipartisan Policy Center鈥檚 Commission on Retirement Security and Personal Savings. 鈥淭hat takes a bipartisan commitment, and a bipartisan approach.鈥濃��
At an impasse
The near-term need 鈥� to boost the debt limit 鈥� doesn鈥檛 necessarily require a larger fiscal deal to be cut, though the two have often been paired. For Republicans demanding spending restraint, one option is to agree to a debt limit hike now and then pin their demands to other legislation, such as on appropriations later this year.
But for now the parties appear to be at an impasse.听
House Speaker Kevin McCarthy, whose caucus includes hard-line fiscal conservatives who opposed raising the debt ceiling or wanted deeper spending cuts in exchange for doing so, has little wiggle room for bargaining. He got House Republicans to pass听the Limit, Save, Grow Act on April 26 鈥� albeit with just one vote to spare.听But Democrats firmly oppose the GOP debt limit bill, which has virtually no chance of passing the Democrat-led Senate.
Unless a different solution is reached, the Treasury Department is expected to default on its obligations听on or around听June 1. Already the Treasury has been using 鈥渆xtraordinary measures鈥� to pay federal bills, after听hitting the congressionally mandated debt limit in January.
Experts warn that that would tarnish America鈥檚 creditworthiness, raise interest rates on everything from mortgages to car loans for years to come, and perhaps plunge the nation into a recession. It could also prompt a global shift away from the dollar as the currency of choice.听
鈥淐rashing the global economy if we don鈥檛 get what we want isn鈥檛 policymaking,鈥� said Senate Budget Committee Chairman Sheldon Whitehouse, a Rhode Island Democrat, at a听听May 4. 鈥淚t鈥檚 hostage-taking.鈥�
Nearly 32 football fields of $100 bills
A million dollars in $100 bills could fit in a school backpack; by comparison, the U.S. debt of $31.46 trillion would take up 31陆 football fields with construction pallets stacked two deep and each containing bills totaling $100 million,听听Jason Fichtner, chief economist of the Bipartisan Policy Center, at the Senate Budget Committee hearing last week.听
At the same hearing, Brian Riedl of the Manhattan Institute听听that current deficit projections would add $20 trillion to the debt over the coming decade, with the long-term picture听even听more sobering.
According to a听听from the nonpartisan Congressional Budget Office, baseline deficits would rise to $114 trillion 鈥� mostly due to Social Security and Medicare shortfalls 鈥� over the next 30 years. Within that period, it would take half the nation鈥檚 tax revenues just to pay the interest on the national debt. If interest rates rise, interest costs could rise to 70% to 100% of tax revenues. That would be akin to having to put one鈥檚 full salary toward interest on a credit card, leaving no听income听to pay off the card or even cover purchases 鈥� thus adding to the bill, and the amount of interest owed.听
Democrats see the solution as raising tax revenues, including by giving the IRS $80 billion for enhanced auditing power, among other things, and by proposing new taxes on the super-rich. Republicans see the main problem as runaway spending. In their听, they proposed cutting most of the $80 billion for the IRS, repealing clean energy provisions and tax incentives, rescinding unspent COVID-19 relief funds, and increasing work requirements for recipients of Medicaid and other benefit programs.听
The Congressional Budget Office estimates that the bill would听听$4.8 trillion over the next decade. That would reduce projected deficits to $1.52 trillion per year, down by $480 billion per year. National debt held by the public听would still grow, however, from 98% to听 of gross domestic product 鈥� though听less than听the 118% currently projected.
The budget that President Biden proposed in March would cut the deficit by $3 trillion over the coming decade by raising revenues, including through a new minimum tax on billionaires and a repeal of Trump tax cuts for corporations and the wealthy, according to a White House听.
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A possible solution
Former Senator Conrad, who was involved in multiple negotiations over the debt limit during his two decades in the Senate, says that the contours of the negotiations have been well defined for years. 鈥淪ame song, second verse,鈥� he half-jokes.听
One solution he sees would be for members of Congress to raise the debt limit for a limited period and appoint a commission to work out the thornier issues of how to balance U.S. fiscal policy. Indeed, the House Problem Solvers Caucus has just that, raising the debt ceiling through the end of the year while appointing a commission 鈥渢o stabilize long-term deficits and debts.鈥澨�
