December 16, 2012

Understanding the debt ceiling myth

Working America - Over the last few days, Republican leaders in Congress—particularly House Speaker John Boehner and Sen. Mitch McConnell—have begun to suggest that, once again, the debt ceiling will be an opportunity for them to make demands.

In order to understand what’s going on—and just how dishonest the rhetoric coming from McConnell and Boehner is—you have to understand what the debt ceiling is. Constitutionally, the power to set spending and tax levels is in the hands of Congress. The U.S. Treasury implements the spending levels that Congress sets—and when the spending level is higher than the revenue level, Treasury has to borrow. They do this by issuing bonds and securities.

Current law says that there’s a cap on what the Treasury can borrow. So, every so often, Congress has to raise this cap. It’s basically a formality—Congress authorizing borrowing in order to allow Treasury to spend what Congress has mandated to be spent.

The reason it’s necessary to raise the debt ceiling is that if we don’t, the government can’t borrow, and thus it can’t pay its bills. Not raising the debt ceiling isn’t like cutting up your credit cards—it’s like using your credit cards and then tearing up the bill when it arrives. If a person did this, it would be kind of crazy; if a nation were to do it, it would be catastrophic.

McConnell and Boehner know how this process works. They’ve just chosen to lie about it, deliberately and repeatedly, in the hopes that the people listening won’t know better. Both McConnell and Boehner are on record saying they won’t pass a debt ceiling unless they get some sort of concessions from the President. “Congress is never going to give up our ability to control the purse,” Boehner said yesterday, knowing full well that increasing the debt ceiling has nothing to do with the “ability to control the purse.”

...The debt ceiling is just a law, and a law that can be changed. The idea of a debt ceiling is not in the Constitution, and it isn’t actually any constraint on what Congress spends. When Congress tells Treasury to spend, Treasury has to do it. President Obama doesn’t set spending levels, and allowing the administration to borrow to carry out what Congress has passed isn’t some kind of favor to the President. If we had no debt ceiling at all, Congress would still maintain “the power of the purse.”

The last time we had a standoff over the debt ceiling, it resulted in real damage to our economy and the credibility of our political system—not to mention that the result was the “sequester” that will hit the federal budget with a painful dose of austerity next year.

McConnell and Boehner are lying about the debt ceiling in order to extract concessions—to implement unpopular policy changes they can’t get through without hostage-taking. And the only reason they think they can get away with it is because they assume they won’t get called on it.

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