The American government is barrelling foward into an abyss in which the nation’s credit-worthiness will be called into question and its economic well-being badly damaged.
And yet, the crisis we face is one created in Washington having little to do with the way our economy functions.
The federal government — specifically, the president and the two houses of Congress — has until next week to raise the national debt ceiling or face the shutdown of government programs, the inability to send out government checks and default on some of our debt.
The crisis is real, if contrived, and the solution is actually rather simple: eliminate the debt ceiling. The ceiling, as The New York Times points out in a useful Q&A today, is a relic of an earlier time:
The system goes back to World War I, when Congress first put a limit on federal debt. The limit was part of a law that allowed the Treasury to issue Liberty Bonds to help pay for the war. The law was intended to give the Treasury greater discretion over borrowing by eliminating the need for Congress to approve each new issuance of debt. Over the years the limit has been raised repeatedly, to $14.3 trillion today from roughly $43 billion in 1940. But outside observers have noted that the failure to make increases in the debt limit part of the regular budget process can be risky. The G.A.O. concluded that it would be better if “decisions about the debt level occur in conjunction with spending and revenue decisions as opposed to the after-the-fact approach now used,” adding that doing so “would help avoid the uncertainty and disruptions that occur during debates on the debt limit today.”
It is an arbitrary limit that treats all debt the same way and strips legislators of their responsibility to consider the long-term implications of their budgeting decisions. Removing our multiple wars from the budget, as was done by President George W. Bush, makes it seem as though the budget is responsible, that we have the revenues to pay for what we want to spend. But the billions that are being tossed down the rabbit hole of our wars in Afghanistan and Iraq (and Pakistan and Libya and South America) come from somewhere. So we borrow.
The same goes for the Bush tax cuts, which were described by the president at the time as stimulative to the economy and, therefore, a revenue generator. The absurdity of the claim was obvious at the time, and has only grown more ridiculous as time has passed.
So, what might we consider good debt? Spending on roads and bridges, for instance, because the result is something with a long shelf life. Basically, you are paying off the use of the roads, bridges, solar grids, rail lines, etc., over the length of their lives. And, this is a philosphical point, you are asking future generations to contribute to the cost of infrastructure that they will be using.
Education would fall under good debt, because it adds value to the workforce (I hate looking at education in this way, but from a budget and debt standpoint, I think we have to). The same goes for R&D and weatherization programs, upgrades to public housing and affordable housing, environmental enforcement (because it maintains a long-term societal good), and so on.
The issue is not debt, but the kind of debt we are dealing with (we have reached a point where we are borrowing to pay off previous debt, a problem that will not be aided by a failure to raise the debt ceiling). And it is a problem with revenue — let the Bush-era tax cuts expire on everyone.
Revenue, of course, is the key issue here. Beyond the Bush tax cuts, we face a serious drop-off in revenue caused by the recession. With unemployment approaching 10 percent and about one in six Americans either unemployed or underemployed, by most estimates, the amount that the middle class can contribute to the federal budget is in decline. The only way to address this is to put Americans back to work. And the only way to do this is for the federal government — i.e., the entity empowed by the American people to act on their behalf — to step in with public works projects, aid to states (to avert public worker layoffs), etc.
And we should eliminate the debt ceiling and leave it to the market to determine whether the United States is a creditable risk.
- Send me an e-mail.
- Read poetry at The Subterranean.
- Certainties and Uncertainties a chapbook by Hank Kalet, will be published in November by Finishing Line Press. It can be ordered here.
- Suburban Pastoral, a chapbook by Hank Kalet, available here.
