PD Editorial: Looming debt ceiling requires compromise
The United States will bump up against the federal debt ceiling this week, probably on Thursday. Then the Treasury Department will have to enact “extraordinary measures” to make sure that the country keeps paying its bills. Those measures will buy Congress a few months to increase the debt ceiling. It’s time for bipartisan compromise and concessions.
The nation’s current borrowing authority — the debt ceiling — is $31.4 trillion. By law, the country may not take on additional debt beyond that. The ceiling wasn’t always that high. That’s just where it was set the last time Congress increased it.
Increases were once routine legislation that passed easily. The debt ceiling does not authorize new spending; it only says that America will pay its bills for what Congress has already budgeted. Congress has passed dozens of increases since it created the debt ceiling in 1917.
Deficit spending is the norm these days under both Democratic and Republican administrations. The debt keeps growing, and sooner or later it hits the debt ceiling. Last year, Washington ran a $1.4 trillion budget deficit — down from $2.7 trillion a year earlier and more than $3 trillion the year before that, when COVID relief spending spiked.
Yellen’s extraordinary measures — accounting tricks, really — will keep the country afloat until about June. Then, without further action, America defaults and all hell breaks loose. What sort of hell is hard to predict because the country has never defaulted. When it came close a few times, that alone was enough for dire consequences to the economy and the nation’s creditworthiness.
“Failure to meet the government's obligations would cause irreparable harm to the U.S. economy, the livelihoods of all Americans, and global financial stability,” Yellen warned lawmakers.
This is a new year and a new Congress. Republicans now hold the majority in the House. They opposed a lot of the spending that is now running up the debt. But they can’t unilaterally reduce spending. The Democratic-controlled Senate and White House would never agree to straight cuts.
The debt ceiling, then, is the GOP’s best bargaining chip.
Republicans say they want to sit down with Democrats and hammer out a deal that includes spending cuts. They’ve vacillated between vague and draconian on what those cuts might be.
Democrats reject the idea of cutting authorized spending as a condition for raising the debt ceiling.
Staking out the most extreme positions might appeal to the parties’ respective bases and extremes, but it is untenable. An increase will require support from some members of both parties. Democrats portray Republicans as holding the economy hostage. But they are only slightly less culpable of the same if their position is they won’t negotiate in the context of the debt ceiling ever, at all, period.
Both sides must compromise and make concessions. Republicans won’t get every cut they want. Democrats won’t get zero cuts. It’s time to talk. Find a deal that the moderate middle of both sides can accept and pass it before June. The risk to the economy otherwise is too great.
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