The Debt Limit Has One Function — Obstruction

It’s time to drop it

Sen. Mitch McConnell courtesy Wikimedia Commons

“Everybody talks about the weather, but nobody does anything about it,” quipped Mark Twain. The same can be said about our growing federal debt and increasing federal budget deficits. The truth is that Congress is simply unwilling to do anything to reverse our current fiscal direction. They make pretenses to having an interest in the topic, such as with the 2011 Budget Control Act (BCA), a well-meaning but flawed effort, but nothing substantive seems to result.

Since 1991, mandatory spending, things like Social Security and Medicare, has exceeded discretionary spending, the annual appropriations funding the rest of the federal government. Currently, mandatory spending is double the discretionary appropriation. However, the BCA, and other budget control efforts, only focus on discretionary. Commenting on the discretionary-focused BCA, Senator Angus King of Maine commented that it was like, “Attacking Brazil after Pearl Harbor — right response, wrong target.”

It’s past time to reverse our path towards having a Greece or Venezuela-like meltdown. The reason for this fiscal lunacy seems clear enough: in today’s hyper-partisan atmosphere this inability to do anything is often because of hyper-partisan gridlock. We have a governmental system of checks and balances that was designed by the Founding Fathers to create debate and discussion leading to compromise. Today we have minimal debate — as seen by the Republican effort to kill Obamacare with no hearings and no defined replacement; and the discussions (if they actually merit that description) that happen on CNN and Fox News but not in the budget committees. All of this makes the ultimate objective, “compromise,” difficult to discuss much less achieve.

But there is one other problem that creates trouble — the congressional time wasted because of old legislative artifacts that no longer serve the originally intended purpose and long ago morphed into tools of obstruction. They have become big bricks randomly thrown on a narrow road. And one of the most damaging is the debt limit. We need to get rid of it.

What is the debt limit and where did it come from? Simply put, the debt limit is intended to be a control device that — as the name implies — limits how much debt the federal government can assume.

Where did it come from? The debt limit was established by Congress in 1917 with the “Second Liberty Bond Act” as a means to control federal spending during World War I. At the time, Congress had a loose budgetary process, no other check on spending levels, and there was concern over the expenses — and debts — being run up by World War I as the American armed forces increased from 200 thousand to over four million. Beyond the troops themselves (the major American contribution to the war), there were thirty-two camps constructed across the country and over 800 other projects undertaken from warehouses to port improvements. So, the requirement to raise the debt limit was born in an era where it served a clear fiscal function — perhaps the only tool for fiscal restraint.

However, at about the same time Congress determined that preparing a budget for what had become a global power was beyond its capability, at least as it existed at the time. Accordingly, in 1921 it passed the “Budget and Accounting Act,” (BAA) which effectively ceded to the president the responsibility of preparing and presenting a budget. The BAA also established the Bureau of Budget to assist the president in this role, and the General Accounting Office (GAO) to assist congress in auditing, evaluating, and if needed investigating budget expenditures. This likely originated the old adage, “The president proposes, and the Congress disposes.”

The Bureau of the Budget, originally in the Treasury Department, moved to the Executive Office of the President (EOP) in 1939 and was renamed the Office of Management and Budget (OMB) in 1970. The GAO was renamed the Government Accountability Office in 2004.

Despite these pieces of legislation and new organizational entities, Congress still lacked a disciplined and integrated process for translating the president’s budget proposal into the constitutionally mandated appropriations. Significantly, the congressional committees that focused on revenue — the “Ways and Means” committees — did not coordinate with those focused on spending — the appropriations committees. Accordingly, the only check on accumulating national debt when appropriations exceeded revenues was the braking mechanism of the debt limit.

In the early 1970s, President Richard Nixon used this lack of congressional fiscal coordination to impound funds, meaning he decided not to spend appropriated funds that he deemed unnecessary or excessive arguing that they added to the debt in an uncontrolled way. In reaction to Nixon’s directive, in 1974 Congress passed the “Budget Impoundment and Control Act.” The act specified that the president could not impound congressionally appropriated funds, and it created the Congressional Budget Office (CBO) to provide Congress with economic analysis on par with those provided the president by OMB. Weakened by the Watergate scandal, Nixon had little choice but to sign the bill.

But most importantly, the 1974 act developed a systemic and integrated budget preparation process for Congress. It established budget committees in both houses that considered the economic projections of CBO (and OMB), determined budget levels based on revenue projections, and allocated the projected resources to the thirteen appropriations committees. The appropriation committees then passed their specific appropriations and the bills were presented for vote in the two chambers and later reconciled in conference.

But, although no longer necessary, the debt limit endured despite the reality that if Congress judiciously followed the rules and timetable established by the 1974 legislation, there should be no need for it. Unfortunately, Congress has a bad habit of not following its own rules and occasionally even misusing them. Despite all the work by OMB, CBO, the budget committees, the thirteen appropriation committees (with their large staffs), conference committees, and the president, the books don’t always balance and the treasury has to borrow money. This is, as everyone notes, to cover expenses that the Congress and president have already obligated the government to pay.

During the 20th Century, the debt limit was raised some ninety times — seventeen times during the eight years of the Reagan Administration alone. So as a device of fiscal restraint, the debt limit serves no practical purpose. But it does serve a political purpose. By threatening to refuse raising it back in 2013, a renegade move by Republican Senator Ted Cruz that eventually shut down the government and called into question the nation’s credit rating, the true modern-day function of the debt limit was put on full display. The 2013 experience showed that a legislative device intended for fiscal restraint had been “weaponized” for political advantage.

Let me be clear. I believe in fiscal responsibility. You need to plan to pay the bill for what you buy. Every household understands that. So as a nation we need to agree on a financial plan. And with the Budget Impoundment and Control Act of 1974, Congress did establish a process for reviewing the president’s budget proposal and systematically translating it into annual appropriations within expected revenue inflow.

Despite the usual rhetoric of the Republican Party, declaring as a firm principle its commitment to fiscal responsibility, it has repeatedly shown itself to have little actual attachment to its own principle. Since the Carter administration, the president who has added the most to our national debt during his time in office, in terms of a percentage increase, was — by far — Ronald Reagan. The national debt was 160% greater when Reagan left office than we he entered. The “Silver Medal” goes to George W. Bush at nearly 75%. Recall that Bush’s Vice President, Dick Cheney, once famously commented that, “Ronald Reagan proved deficits don’t matter.” Obviously, the numbers racked up in the Bush 43 administration show he meant it.

By comparison, the debt increase in the Obama administration was 65% — more than double that recorded by Carter and Clinton, but most of that went on the books in Obama’s first term while digging out from the “Great Recession,” an inherited economic dislocation demanding deficit spending.

As stated, I favor fiscal responsibility; however, I don’t favor political games that threaten to de-rail a nearly $4 trillion federal budget serving 330 million Americans over some issue important to a small group amounting to a fraction of one percent. And remember that the Treasury Department is confronted with exceeding the debt limit because it has to pay bills the Congress has already approved in its appropriations process. If the debt limit had any practical meaning, the annual appropriations bills would be crafted to stay below it.

But, as we are seeing today, here we go again. Senate Minority Leader Mitch McConnell has objected to raising the debt limit and is using it as a device to inhibit passage of President Joseph’s Biden current budget. And his move is overtly political. He readily admits that the debt limit must be raised, and he has been directly informed by former Republican Treasury Secretaries Henry Paulson and Steven Mnuchin of the enormous economic risks attached to a national default — the inevitable result of not raising or suspending the debt limit.

But McConnell remains unmoved. Why? Because he wants the Democrats to take it on themselves to raise the limit, a move that is normally politically unpopular. And why does he want that? To increase the odds, in his calculation, of winning enough Senate seats to give the Republicans a majority and return him to the role of majority leader, expanding the opportunity for continued political mischief. The political dimension is the only lens through which McConnell sees any issue, be it healthcare, economic health or fiscal responsibility. By the political measure, he is well suited to be the current Republican leader in the Senate. But because of that singular political perspective, others, such as conservative congressional scholar Norm Ornstein, have declared McConnell the worst Senate leader ever!

But given permanently removing the debt limit isn’t legislatively feasible at the moment, the Democrats should simply do what McConnell suggests and raise it themselves. In 1993, Congress passed the “Deficit Reduction Act” without a single Republican vote in either chamber. Vice President Al Gore cast the deciding vote in the Senate where the bill passed 51–50. Newt Gingrich, then the Republican whip in the House, reportedly stated that the coming damage to the economy, because the bill raised taxes in addition to cutting spending, would be completely on the Democrats. Of course, the economy took off after that legislation passed and the budget was in surplus five years later. Gingrich has spent considerable time since then unpersuasively arguing that other steps he took in his tumultuous tenures as Speaker led to the improved budget picture. Nonetheless, the Democrats did pay a political price in the 1994 election because of the tax increases. Voters understand a tax increase, it directly impacts them; they largely don’t understand the debt limit, and they won’t care if the outcome of its demise is a better economic outcome. So, for the moment the Democrats should “just do it.”

Like most Americans I have grown frustrated by the Congress’s inability to function, and perhaps in no area is the dysfunction more prominent than in its inability to follow its own budget rules and timeline. As one old Washington observer has noted, “Congress can do one of two things: nothing or over-react.” That has to change, and a useful start would be in tossing out some of the old rules and procedures that no longer serve their intended purpose — much less a useful one. In addition to the debt limit, that likely requires tossing out some of the current members who seek political gain by employing these old relics for their own purposes at the expense of the rest of us.

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At Politically Speaking, we come together to share our views on politics and society. We are a proud supporter of equality and fair treatment for all people. We stand against racism and the oppression of people of color. Here at Politically Speaking, when we see, we speak!

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Tom Davis

Tom Davis

Tom Davis is a 1972 West Point graduate with a Master’s degree from Harvard University. He is author of the Cold War novels “Conclave” and “Empty Quiver”.

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