The Government's Endless Appetite for Spending

It's time for Congress to go cold turkey.

Last December, Congress approved a $290 billion increase of the debt limit to support the government's borrowing through February. This lifted the total amount the federal government can borrow to $12.4 trillion.

But today Congress wants to go into even more debt. According to news reports, on Wednesday, Democrats proposed allowing the federal government to borrow an additional $1.9 trillion to pay its bills, a record increase that would permit the national debt to reach $14.3 trillion (roughly the size of our GDP) to support the federal government's borrowing through 2010.

Since they have been in full control of the federal purse strings, Democrats have spent a lot of money and got the country into a lot of debt. Hence the two consecutive increases of the debt limit in 3 months. And they aren’t the only ones. According to the Office of Management and Budget, the federal debt limit has been increased 98 times since 1940—more than once a year on average. Under President George W. Bush alone, Republicans voted to raise the debt limit by more than $6.4 trillion.

When the statutory debt limit was instituted in 1939, its explicit goal was to limit congressional spending—which is supposedly still its purpose today. Technically, if the debt nears its statutory limit, the Treasury cannot issue new debt to manage short-term cash flows or manage the annual deficit and the government may then be unable to pay its bills.

Obviously, that worked for a while. The chart above shows increases in the federal debt and the statutory debt limit since 1940. From 1940 to the beginning of the 1980s, the debt and its limit grew slowly. However, during the 1980s both the debt and the limit started increasing faster. Almost each year during this period, Congress would pass a new law raising the debt, though it didn’t systematically grow the debt to the level capped by the limit.

It took a Republican in the White House and a Republican Congress to change that. In 2005, for the first time in history, the debt limit had to be extended after the debt had already gone $487 billion above the cap. This happened again in 2009, after the debt issued by the Treasury went above the limit by $1.5 trillion. Finally, this year the debt has already outgrown the limit by more than $2 trillion, which explains the need for a second increase of the cap in less than two months.

Many lawmakers will argue that they have to raise the limit because, by law, the debt must be below the limit. However, raising the debt cap is only a symptom, not the cause, of the bigger problem. Namely, the federal government’s endless appetite for spending.

In practice, the debt limit is a very poor budget constraint because it does not alter either the spending or revenue policies that determine debt and deficits. Think about it this way: If you want to lose weight, the only solution is to reduce your current weight. Just telling yourself that you can’t gain an additional 30 pounds in the next year won’t help. In fact, it will only make things worse. Congress needs to stop spending money rather ruling that it should simply increase the debt by more than $2 trillion this time around.

Veronique de Rugy is an economist at The Mercatus Center and a columnist for Reason magazine. Read her Reason archive here.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • HeadTater||

    Big surprise. Politicians are greedy and have little regard for future responsibility. Next you're going to tell me "Jersey Shore" is full of a bunch of guidos.

  • Old Mexican||

    But today Congress wants to go into even more debt.

    Ah, these teenagers - when will they ever learn to be responsible with money.

  • Old Mexican||

    In practice, the debt limit is a very poor budget constraint because it does not alter either the spending or revenue policies that determine debt and deficits.

    No!

  • Old Mexican||

    Many lawmakers will argue that they have to raise the limit because, by law, the debt must be below the limit.

    Politicians, indulging in circular thinking? Who would have thunk it?!?

  • Hank||

    Damn, another hockey stick.

  • ||

    Logarithmic systems have a bad habit of "sneaking up" on you, because 90% of the system's effects happen in the last 5%-10% of the system's measured run-time.

    "Classic" fission bombs work this way. Around eighty generations of neutron multiplication lead to the big ~20 kiloton boom. But the first seventy generations of the neutron multiplication generate an M80 firecracker's worth of explosive force. Virtually all the entropy is really in the last ten generations.

    That's the kind of mathematical behavior of the U.S. government (and society in general) with debt, ever since Nixon closed the gold window and ran 240 volts into the Xerox.

    We're on the cusp of the this system's run-time, when all the damage really piles up leading to a wild calamity no one has the power to stop (see nuclear bomb metaphor above). The housing bubble popping was the beginning of the end for this financial system.

    That essential, logarithmic property of our monetary system is why I don't think anyone can fix this pig from a macroscopic perspective. It will have to violently blow itself apart first.

  • Joe M||

    +1

    Just looking at that chart makes it so blaringly obvious a disaster is on the horizon that only a politician would ignore the reality smacking them in the face.

  • ||

    You had me at "'Classic' fission bombs..."

  • ||

    "That's the kind of mathematical behavior" of any process that grows in time as a factor of its own size, but is then measured in nominal terms. It's not only true of debt: it's true of GDP, population growth, the value of the Dow Industrials, and a host of other common statistics. The proper way to look at such processes is on a log graph, where the trend line will often then be seen as flat -- or relatively constant with respect to *percentage* growth over time.

    I don't dispute that government debt is a huge problem, but the reason is not that it is a "logarithmic system".

  • Lazy Jack||

    On Janaury 27th, the President will discuss just how good all this profligate spending is for you. Got me thinking what the alternative might be.

    In terms of economic prosperity and freedom, which will be more important to watch on Janaury 27th; The State of the Union Address or the new product announcement from Apple Computer? This is a serious question. Apple probably created well over $300 billion in wealth for Americans in the last five years. By the end of 2010 the federal government will have created $7 trillion in additional debt in that time ($4-$4.5 trillion projected in the first 24 months of the current administration). Let's also be frank, no less than 75% of that increase in debt was for civilian spending. So which creates more economic freedom: wealth creation or indebtedness?

    Lazy Jack

    http://thanksforthelaughs.word.....n-address/

  • OMG||

    Steve Jobs for President! (He's for "Jobs", will you be?)

  • ||

    And extend the infamous reality-warping field over the entire American empire? No thanks. Besides, the one we already have is doing pretty well on its own. Jobs could learn a few things from the DC spinmeisters, I think.

  • South Park resident||

    They took Steve Jerbs!!!

  • ||

    America is rising and the Progressive/Socialist agenda will be defeated and capitalism will survive again. Entitlements will eventually destroy America if the socialist agenda is brought forward.

    http://patriotupdate.com/stori.....oliticians

  • Some Guy||

    Why don't they just repeal the "cap" to save time and energy? That way I wouldn't have to feel as enraged every time they raise it.

  • josey||

    Government, in any form, must necessarily follow an upward growth trajectory.

    It is readily observed that human nature includes a drive toward self preservation. As the future is always an unknown, self preservation implies the concept of savings: the storing up of resources for a rainy day. (I am ignoring here other factors which also produce a tendency toward growth; they are less general and ultimately anecdotal and arbitrary) Consequently, the inclination toward material gain is inherent to the basic nature of rational beings in all known worlds. Absent external constraint, this tendency toward growth has no known upper limit, as regards its rate; functionally, it is constrained by a general scarcity of resources; to gain, a person must obtain, refine, and process raw materials, and/or engage in commerce with others to acheive what each regards to be a mutual benefit.

    The exercise of force represents the only known method for contravening these natural bounds to material gain; there is no other known method available for circumventing the basic necessity to obtain, refine, process, and trade.

    Government is an organism which is entirely made up of such rational beings; the condition of being involved in a government does not preclude the individual's natural proclivity toward the pursuit of gain, and so, government itself also inherits this tendency. Of course, this is not unique to government; also being made up of individuals, it is equally true for any other corporate body.

    As government, by its very definition, claims a monopoly on the initiation of force in a given region, and employs that very same force to ensure its monopoly in perpetuity, it follows that the only possible restrictions on growth for a government would be (a) its own self control with respect to its use of force and, (b) its tendency toward self preservation in the face of its ultimate subservience to its constituency.

    The interesting question then, might be: is it actually possible for a corporate body the size of the federal government of the US to act with the coordination necessary for acheiving a perpetual state of successful self preservation? Or, is it more the case that its eventual overstepping is guaranteed, being only a matter of time?

    I would tend to believe the latter to be true. Furthermore, the more powerful a government gets, the larger it gets; the larger it gets, the slower its reaction time becomes, so I would suggest that it is an inherent property of a government that the time curve toward its eventual self-destructive over-stepping, and consequentially, the rejection of its legitimacy by its constituency, is necessarily an exponential one.

    The one concrete thing that we know about empires is that they have all eventuall come to an end; there is no reason to believe that this one will be any different. Nobody knows what the time scales here are, but from the looks of it, I'm guessing that we may be in for a bit of a bumpy ride.

  • ||

    Beautiful! So well-written and smooth! So devoid of any notion that there might be anything we, the ignorant, racist, terroristic and savage indigenous population of North America might do to prevent a catastrophe!!

    One of you fellows round up a bunch of chicken feathers - make that about 500, 000 pounds of feathers - another bunch of you get some low-temp asphalt, the cheap stuff, probably - oh - about 10,000 gallons or thereabouts and heaters to heat it in and trucks to move it. You over there by the water cooler, yes, you!, go find a bunch of rails from defunct railroad lines. Bog knows there's a bunch of them around! Let's see .... hmmm ... feathers, tar, rails .. yep that's it. Everyone else! Listen Up! Meeting by the Washington Monument, right after the 2010 general general elections. Okay? Be there or ... well, you know. heh.

  • ||

    Stop. Just fucking stop already.

  • Eric||

    What's funny is that people keep buying US Debt. Do they really think we are going to repay this?

  • OMG||

    Do you know "who" is buying US Debt right now?

    The Chinese are winding down as fast (which means slowly) as they can.

    How much of the debt is being bought by the Fed through quantitative easing?

    How much is being bought by the big banks, circulating funds that they borrow out from the Fed Window straight into the Treasury through 2-10 year note purchases?

    I can't imagine that any retail investor or institutional investor that doesn't have access to the Fed window is buying any treasury security with a maturity greater than 6 months.

  • A||

    :(

  • anonymous||

    tl;dr

  • monkeys||

    Bukkae is just for gay guys who haven't come out to themselves yet. Like circle jerks.
    The girl's just there as an alibi.

  • ||

    Republicans spend money faster than Democrats - no doubt.

    So what?

    Bush 41 and 43 did respective bailouts.... pedantic.

    We need to get back to the Constitution - like Fox News interprets!!

  • The Libertarian Guy||

    We're HOW much deeper in debt in the last eleven months, now?

    It was wrong when Rs spent us into a hole. Don't excuse Ds for doing the same fucking thing.

  • Mr. FIFY||

    Don't expact an answer to that anytime soon, TLG.

  • The Libertarian Guy||

    Yep, shrike is definitely being the coward he truly is.

  • Old Mexican||

    Re: Shrike,

    We need to get back to the Constitution - like Fox News interprets!!

    Don't tell me, don't tell me! Your interpretation is better, right?

  • Rob||

    Just curious about the chart:

    Does it take inflation into account? Does it take GDP growth into account?

    Bukk: was it good for you? You must have way too much time on your hands (and god knows what else).

  • suckitupcrybaby||

    Gulliver were doomed,we will never make it. I am curious what happens if China calls their loan? Do they foreclose on the United States? I need to look for a condo in Spain.
    www.suckitupcrybaby.com

  • Jimmy 'Crack' Corn||

    There are many different charts that would more acurately reflect the scope of the problem of deficit spending.

    Perhaps a slope that shows dollars of debt per person in inflated corrected dollars. It would still look bad, but it would be a lot more meaningful.

  • Ross Perot||

    Now, if you'll look at this bar graph... can I finish, Larry? Just give me a minute here... I don't want this job... now, the pioneers... Larry? Larry? Can I finish? You couldn't PAY me to do this job, I'm just doin' it fer the American people...

  • Jimmy 'Crack' Corn||

    that would be 'inflation corrected dollars'...

  • ||

    It's worth noting that there is a small benefit to having a statutory limit in that the legislature has to vote to increase it, and thereby has a potential political cost. It seems we are approaching the point where all these years of increasing the limit is finally going to get them into trouble with the voters

    Next look for them to change the law to allow automatic increases.

  • ||

    We are living in the age of economic slavery. It requires a great power, a compelling influence, to free the thinking and living amoung us from the unyealding grasp of a totalitarian religious domination. Secularism did break the chains of church control, and now it threatens to establish a new and godless type of mastery over the hearts and minds of us all. The oppressive and dictatorial political systems are the direct offspring of our scientific materialism and philosophic secularism. Secularism no sooner frees us from the demands of the institutionalized church than it sells us into slavish bondage to the totalitarian state. Secularism has freed us from religious slavery only to betray us into the tyranny of political and economic slavery.

  • OMG||

    cucko for cocco puffs!

  • sumguy||

    Bud ... hypothesis fail. Quite a few of the Founders were scientific materialists and philosophically secular. Yet, they were frankly libertarian in their view of government. Add to that the fact that many of those responsible for our present morass are anti-science Creationists and your summary is thrown into quite a spin.

  • ||

    Don't even get me started on the republicans endless need to distort and makeup stuff as they go along just to suite their needs. Honestly I don't understand your endless hype about government spending until a problem happens than you instantly would want some solution from the government which guess what adds to more spending.

    You guys are fools and non-amusing ones at that. So much so that you make me want to vomit with your pathetic narcissistic need to make the government look like the bad guys and you look like the good guys.

    After all if you can make the government look bad and you (republicans) look like the good guys you can get people to cater to your every whim. It's a pretty crafty idea but you forget one thing. We tried that and guess what IT DOESN'T WORK.

  • OMG||

    Thanks man! I can sleep better tonight. I was all worried about the deficit, exploding taxes, unfunded liabilities in medicare and social security, bankrupt state governments and kleptocratic corporations and banks sucking our hard earned taxes out of the system like a baby at the teat … but that was all before you came along.

    Now I realize that government is my friend and can do no wrong, only evil people (i.e. Republicans) would criticize the government to try to make it look bad so they can control us!

    Now I know the truth. Now I am armed with the facts.

    Thank you brother.

  • ||

    Who will Obama blame when China stops buying the debt? Obama is in the process of bankrupting the US!! Since he already has 'an enemy a month', can only imagine who he will blame when the US starts defaulting on the debt!

  • OMG||

    China has already begun to slow down their debt purchases … the Fed has stepped in directly and indirectly through the large investment banks.

    That's a whole look of US debt on the balance sheet of China, the Fed and the Banks that needs to eventually make its way into the system.

  • Glenn Koons||

    I find it hard to believe this crew in the WH and his socialist pacifist minions in Congress want him a. to run their national campaigns with the same people Obama used in 2008. I guess he thinks lighting will strike again though the storm has been all his. b. That he now wants to cut discretinary spending. Big Whoop. The guy has spent more in one year than W did in 8. He has raised taxes. He wants more taxes and more spending and that is before Cap and Trade, Amnesty and, and, the end of the Bush Tax Cuts. Yipe. This guy is not only a socialist, he is drunk with power and is so inept that he thinks he is in some 3rd World nation where the serfs will just go along to get along. Ain't going to happen Mr. Messiah. You are using band aids of some type of faux moderation when we all know you are Alinsky incarnate. For such a brain, you need a bit of common sense from The Tea Party Groups. Learn about free enterprise and our Constitution. And while you are at it, get Dick Cheney to protect our national security. Your bums will get us all killed.

  • Ratko||

    When China decides our natural resources can pay down our debt surely those who fought tooth and nail to prevent our own access will have no problem with China doing so.

  • Glenn Koons||

    Discretionary spending. Isn't that what we Dems want to spend because you peons don't know what is good for you? Or is it, we will cut those programs that will benefit all you investors. You are just Fascists anyhow. While we good Commies are looking out for SEIU and ACORN. No. Oh yeah, it is spending that we in Congress used to put forward to bribe voters just before elections and we really can cut that because you know, I am from Chicago like Ploufe , Rahm and .....Al Capone.

  • Tachyglossus||

    To paraphrase Lenin, "Debt limits are like pie crusts-made to be broken."

  • ||

    America is rising and the Progressive/Socialist agenda will be defeated and capitalism will survive again. Entitlements will eventually destroy America if the socialist agenda is brought forward.

    http://patriotupdate.com/stori.....oliticians

  • abercrombie milano||

    To paraphrase Lenin, "Debt limits are like pie crusts-made to be broken."

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  • Paul Hutch||

    It's interesting to see that even during the 'boom' years the debts were piling high. It seems that no matter who is in Government, they do not know how to budget!

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