What We Talk About When We Talk About the Debt Ceiling: Nothing Much, Sadly.

As I noted yesterday, the apparent stand-off over increasing the debt limit is, to paraphrase Seinfeld, real...and it's spectacular. According to The New York Times, there is no serious deal-making going on.

The debt limit or debt ceiling restricts the total amount of money the federal government can borrow and it dates back to 1917. By most accounts, the government will reach the limit in mid-October.

Assuming no deal has been reached by then, the government will have to prioritize what it pays out based only on current revenues. If it chooses not to make interest payments on existing debt, it will default on its debt and most people agree that would have catastrophic consequences for both the U.S. and world economies.

For years, the debt ceiling typically - though not always - was rubber-stamped by a Congress that, regardless of party, always knew that spending more money was a sure way of getting re-elected. That's changed lately, with 70 percent of respondents telling the latest Reason-Rupe Poll that they oppose raising the debt ceiling. (55 percent said not to raise it even if that means defaulting.)

Is that simply because some (most?) people have no idea of what the debt limit or default really mean? Almost certainly. By the same token, it's because neither party nor the president has been serious about governing for years, especially when it comes to fiscal policy, or what the government spends year to year. The elite media narrative, of course, is that any sort of failure to launch is solely the province of knuckle-dragging, tea-bagging Republicans.

The most important thing about the current non-negotiation over the debt ceiling is that no one is seriously talking about government spending. The list of demands by House Republicans is long on delaying Obamacare, going forward with the Keystone XL pipeline, and kickstarting tax reform. For his part, Obama is refusing to have any conversation about attaching any conditions to a debt-limit increase. However politically astute they may be, these are both ridiculous positions to take.

Obama's refusal to bargain is popular among his supporters in the media, who think the president's willingness to negotiate back in 2011 was a mistake. As New York's Jonathan Chait puts it,

Bargaining his way through this crisis would do Obama no good, even if he could get through it by offering up a meager or even symbolic concession. Anything that allows Republicans to believe they can trade a debt-ceiling threat for policy concessions simply creates a new hostage crisis the next time the debt ceiling comes up. This negotiation is Obama’s only chance to halt the routinization of debt-ceiling extortion.

For his part, Obama is talking a good game:

No Congress before this one has ever, ever, in history been irresponsible enough to threaten default, to threaten an economic shutdown, to suggest America not pay its bills, just to try to blackmail a president into giving them some concessions on issues that have nothing to do with a budget.

Eh, maybe. Though let's note that "House Republicans" doesn't equal "Congress." There's that pesky other body, the Democratically controlled Senate, which Obama used to belong to. You know, when he was fond of saying stuff like this back in 2006:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. government can’t pay its own bills. ... I therefore intend to oppose the effort to increase America’s debt limit.

What's more interesting is what's going unsaid in all the current discussion of the debt limit. Obama is right that most if not all of what the GOP House is squawking about has "nothing to do with a budget." But why don't we have a budget? Is that simply the Republicans' fault? Well, no. Under the Republican control, the House has passed a budget each of the years in which Obama has been in office. Earlier this year, the Senate passed its first budget in four years. In fact, the Democratically controlled Senate didn't even produce a budget document, much less vote on one, for most of the years that Obama was sitting down the street in the White House. And what happened after House passed a budget calling for spending $3.5 trillion in 2014, the Senate passed one calling for $3.7 trillion, and Obama submitted one calling for $3.77 trillion? Pretty much nothing. The failure to move forward is shared.

The new normal during the Obama years has been to do nothing serious on the budgeting front. That's why federal spending has flatlined at historically high levels since fiscal 2009. That was an odd year in which spending included items from both outgoing President George W. Bush (TARP, etc.) and stimulus spending passed within weeks of Obama taking office. But since then (including 2010, when the Dems still controlled both houses of Congress), it's been continuing resolution after continuing resolution.

This manifest and trans-partisan failure to settle what is arguably the first order of government - to decide a budget - is why the debt limit is becoming so contested in recent years. Budgeting has never been an easy process but there is no reason to think that failure is anything other than a failure of leadership by Obama, Speaker John Boehner (and before him, Speaker Nancy Pelosi), and Majority Leader Harry Reid. Add to lack of leadership the explosive growth and/or historically high levels of government spending for the past 13 years under Republican governments, Democratic governments, and mixed-party control and everything starts to fall apart.

Put slightly differently. 70 percent of Americans aren't against raising the debt limit because a handful of Tea Party Republicans are holding the country hostage. They are doing it because the president, House, and Senate leaders haven't done their jobs.

And judging by press reports, which stress the lack of conversation among the various main players, that's not likely to change anytime soon.

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.

  • Sevo||

    OT:
    Obama promotes $300m for Detroit, but it's not a 'bailout'! Oh, no, it's a kinetic something something!
    "$300 Million in Detroit Aid, but No Bailout"
    http://www.nytimes.com/2013/09......html?_r=0
    Sleazy, lying piece of shit...

  • LynchPin1477||

    The signals are intended for outside investors and residents alike. “There is this quiet desperation of just everyday normal people, of why does nobody care, why isn’t anybody helping us,” said Debbie Dingell, a local leader and the wife of Representative John D. Dingell, a Democrat whose district is west and south of Detroit.

    You could start by helping yourselves.

  • All-Seeing Monocle||

    No shit. Saw that on the teevee this morning and it made me want to put a screwdriver in her skull.

    Tell ya what, Debs, you print up the letters informing all current and previous municipal employees that the pension funds are dissolved effective immediately, I might chip in on the postage. How's that for help?

  • Invisible Finger||

    But Matt Taibbi says it's Wall Street stealing those pension funds. STEALING!

  • Rich||

    If it chooses not to make interest payments on existing debt, it will default on its debt and most people agree that would have catastrophic consequences for both the U.S. and world economies.

    Maybe the government could try a test default and see what really happens. If it's bad, just raise the debt ceiling gradually until things improve.

  • UnCivilServant||

    Who are these "most people"? We need to shock the government off of its debt and spending addiction.

  • Rich||

    Well, there's Ben, and Paul, ....

  • Paul.||

    Huh?

  • Eduard van Haalen||

    Depressing...let's get back to naked zombie haunted houses.

  • RG||

    The otion that the economy will collapse if the ceiling isn't raised tacitly admits that the entire global economy is built on ever expanding debt.

    Yet no one in the media seems to want to touch on that implication.

  • Rich||

    It's not "debt" -- it's CREDIT!

  • Paul.||

    You laugh, but that's exactly how it's seen. They want to raise the 'credit' limit.

    When a major city newspaper reports that "US May not be able to pay bills come October" is saying that in effect, if we can't raise the credit limit on the home equity loan, we won't be able to pay our credit card bill.

    They say this with a straight face.

    I know I know, government budgets aren't like real budgets.

  • Palin's Buttplug||

    Way to go, Nick. There is that table that shows federal outlays slowing under Obama again.

    It drives the Bush fans nuts.

  • robc||

    2013 is greater than 2010, so you dont even know how to read a graph.

  • Paul.||

    He said 'slowing'. Remember, to a progressive, 'slowing' is a cut.

  • Andrew S.||

    I can never tell if you're purposefully lying, or if you're just stupid. Hanlon's razor would tell me the latter, but it's difficult for me to tell.

    That last year under that idiot Dubya, we were told, was a one-time "stimulus", and that spending would be reduced to "normal" levels the following year. Instead, the stimulus was the new "normal"

    (I know, don't respond to it, but it's very difficult not to)

  • RG||

    Its BS is easy to counter. The Republicans in Congress are mostly responsible for the slower icnreases in spending. They forced his hand on the sequester, they refused to pass additional stimulus, etc.

  • Palin's Buttplug||

    Yes, there is truth to that. I like gridlock with a (D) POTUS. It works out the best as history has proven.

  • RG||

    Just look at Obama's proposed budgets. More than what the Senate or House were proposing to spend.

    So let us know how Obama "contained" spending.

  • Palin's Buttplug||

    I don't understand why you are trying to shine up Bush's already shit-splattered legacy unless you are just a Team Red player.

  • Jordan||

    Please show where he defended Bush. Actually, just fucking leave until you learn how to read.

  • some guy||

    P's B is obsessed with Bush. I don't really see why. Sure, Bush was a terrible president, but really he was about average as presidents go. In 100 years people will remember as much about Bush as they remember about that guy who came before FDR.

  • Adam330||

    glad to hear to you support the house republicans effort to reign in obama.

  • Juice||

    I agree. You can't beat this current setup. Repub House so taxes never increase (at least). Divided Senate with a slight Dem majority. And a Dem president who only pretends to want to go to war instead of actually doing it. No one gets what they want and there's nothing but constant gridlock. It's about the best we can hope for these days.

  • Palin's Buttplug||

    Nah, it has been proven that Ike and Obama contained spending the most. Look at the total record from beginning to end and not just one year.

  • Andrew S.||

    Yeah, I'm going with "purposefully lying".

  • #||

    PB still lives int he fantasy work where the 2009 budget year that included Obama's stimulus, the dems immediate increase in descretionary funds, the expansion of S-Chip, the auto bailouts and so forth are all BOOOOSH.

    So he uses Obama's massive spending bilge year as the baseline for what he "inherited" from Bush and then compares that to the statis quo which has had 3 years of republicans blocking Obamas new proposed spending bills.

    Somehow this is the logic that makes sense in his delusional head.

  • Palin's Buttplug||

    Nope. CBO put 08-09 spending at $3.5 trillion in JANUARY 2009.

    http://www.cbo.gov/sites/defau.....timony.pdf

    BEFORE Obama took office.

  • Mike M.||

    I can never tell if you're purposefully lying, or if you're just stupid. Hanlon's razor would tell me the latter, but it's difficult for me to tell.

    The former. It's a vile, purposefully lying little JournoList vermin.

  • wareagle||

    a few people have pointed out how global warming is "slowing" as well, but they're dismissed as cranks.

  • R C Dean||

    The same dishonest chart that attributes Obama's stimulus to Bush.

  • The Late P Brooks||

    Assuming no deal has been reached by then, the government will have to prioritize what it pays out based only on current revenues.

    Armageddon times eleventy balillion!

  • The Late P Brooks||

    The debt limit is just that. If we hit the end of our tether on borrowing, we'll just have to switch to pay as you go.

    Sometimes I really want to see the results of putting government services on C O D status. "You like flying, right? And air traffic control, and security theater, and concrete runways? Fine; there will be a $150.- surcharge on your plane ticket henceforth. That 18 cent gas tax will have to rise. Five bucks per gallon ought to do for a start. And on, and on."

  • mb||

    Do not perpetuate lies.

    The treasury states the debt started FY 2013 at $16,159,487,013,300.35

    http://www.treasurydirect.gov/.....dYear=2013

    According to CBO we have racked up an additional $753,000,000,000.00 in debt this year

    http://www.cbo.gov/publication/44552

    which according my calculation means debt should now be

    $16,912,487,013,300.35

    Well above the debt limit.

    "http://www.treasurydirect .gov/govt/charts/charts_debt.htm"

  • Brett L||

    I have also heard from other sources that we are probably above the debt ceiling but October is a net revenue month for the Treasury, so they're using some tricks to shift spending to keep them "technically" under the limt.

  • some guy||

    If I were to use these same tricks in accounting for my personal or business finances would I only have to pay a fine or would I go to jail?

  • Brett L||

    Are you in line for a cabinet position?

  • some guy||

    It's assumed that I am not a TOP MEN.

  • Christophe||

    Then you're going to jail regardless of what you do, eventually.
    Know your place.

  • R C Dean||

    They are also "borrowing" from various "trust funds" to keep from hitting the limit.

    Smoke and mirrors, my friends. Smoke and mirrors.

  • mb||

    What trust funds are cash flow positive?

  • some guy||

    They don't have to be cash flow positive, do they? Just in the black.

  • mb||

    in the black? like social security? that money was spent, they have government issued "bonds" in the bank.

  • Troy muy grande boner||

    From the comments at the Wall Stree Journal: Raising the debt ceiling is not for the benefit of Democrats, or Republicans, it's for the benefit of all Americans. So just what are the Republicans holding hostage? Their futures are at risk as much as the futures of the rest of us, and,perhaps, the future of the country.

    Translation = "God damn it, we are entitled to this money that we don't have."

  • ||

    Oh look, assplug showed up to felate Obama on a budget column.

    I. AM. SHOCKED.

  • Palin's Buttplug||

    He is the only POTUS to propose serious Social Security cuts (chained CPI).

    He offered Boehner $3 in spending cuts for each dollar in tax hikes.

    On the deficit he has shown leadership as well as cutting it in half ($600 billion this year).

  • Brett L||

    Noo. He offered Boehner $3 reduction in future projected spending (which is obviously up for renegotiation at the next budget) for each dollar in tax hike today. Call it the "Wimpy Plan".

  • #||

    And most of the $3 dollars was either the wars ending, which were already going to happen, or budget gimicks in Medicare reimbusment rates.

    Actual "cuts" even described as reductions in future spending grown were about 1/10 the tax increases.

  • #||

    While most of that deficit reduction has been 1. all the tax increases that went in place this year 2. the sequester and other modest spending restraints that he faught brutally against 3. a lot of peoples unemployment insurace running out/ the stimulus ending.

    The onyl thing Obama has done to intentionally reduce the deficit is raise taxes. While eveything else has either been an accident or has happened despite him/ the rpeublicans wouldnt let him spend even more.

  • ||

    Saying I won't spend three dollars in ten years if you pay me an extra dollar this year is nothing but thin air.

  • CE||

    Obama's outspending Clinton by 50% in inflation-adjusted dollars, and tax revenues are much higher than they were 10 years ago. So why should we need any tax hikes to offset the spending cuts? Don't Democrats always remind us how fiscally prudent Clinton was? Why are they okay with vastly outspending him and going into ever deeper debt now?

  • Invisible Finger||

    He is the only POTUS to propose serious Social Security cuts (chained CPI).

    Bush's proposed opt-out would have cut SS almsot 100% because only stupid pieces of shit like you and Detroit residents would trust the government to safeguard their money.

  • Tony||

    I think everyone should be able to agree that if your problem is with Congress spending money, then you should focus on the appropriating it does. The debt limit is not a license for more spending, it's a procedural ritual that is being used for political leverage by psychopaths.

    Of course Chait is correct. Obama made a huge mistake letting it be used this way before, and it appears he is taking the right course of action this time (telling Boehner to go fuck himself). The question is what leverage does he have to counter the Republicans' apparent willingness to harm every American citizen for petty partisan reasons?

  • some guy||

    Tony, the debt ceiling is a law, not a ritual. If appropriations bills were supposed to be the be-all-end-all of spending then the debt ceiling would either be raised by the appropriations bills or wouldn't exist at all. The fact that it exists and is unaddressed means that it is fair game, politically.

    I thought you were the one who was all about taking a realistic look at things. You know, it's not a right unless you actually enjoy it, and so forth.

  • Tony||

    It's fair game if you're a psychopath who is willing to use the entire country's 401(k)s as a hostage in legislative negotiations.

  • Auric Demonocles||

    If your problem with Congress is them spending more than they take in, you should tell them they can't do that.

    If Obama wants the law to change from what it currently says, but is unwilling to accept any compromise with lawmakers, then he's the one "holding the country hostage."

  • Tony||

    Not destroying the economy is not an issue on which legislators "compromise."

  • Juice||

    Then Obama should sign the bill into law and fund the government.

  • Auric Demonocles||

    If he and you really are so stupid as to think that not raising the debt ceiling will destroy the economy, and you're unwilling to give up anything to do that, why are the other people the bad ones?

    Obama could get the debt ceiling raised today, if he really wanted to.

  • Paul.||

    The debt limit is not a license for more spending, it's a procedural ritual that is being used for political leverage by psychopaths.

    Ok, so then let's not raise it. Or is it not just a ritual?

    When you say that something is just a ritual, then if I agree with you, I'm willing to engage in the high stakes game of chicken and not engage in the ritual. If you're not willing to forego the ritual, then you don't actually believe it's 'just a ritual'.

  • Tony||

    I'm not saying it's not potentially very damaging. I'm saying it's not the same thing as appropriating. It has nothing to do with libertarian, conservative, or Tea Party complaints about government. It's just a quirk in the law that is being exploited in an insane game of legislative chicken.

  • Juice||

    It's not just some quirk. It's an attempt to control fucking debt. The law says that the Treasury cannot have outstanding debts past a certain limit. Everyone involved knows well in advance what the limit is, but no one does anything to attempt to stay under that limit. Ever.

  • R C Dean||

    That debt chart shows an asymptotal curve going vertical.

    The very definition of unsustainability.

  • Tony||

    Too bad you can't read any of the text. This place has proffered too many fraudulent charts to be allowed to get away with not showing its work with clarity.

  • Mike M.||

    Hey dickhead, are you really that fucking stupid? I think you are. Click on the fucking chart with your mouse and it takes you to the source of the info with a bigger and more readable version of the image. Click on the second one and it takes you to an even bigger and more readable image still.

    Princeton has truly lowered its standards to appalling levels to have someone like you there who can't figure something so simple out.

  • tarran||

    Tony attends Princeton?

    I thought he was a rich Okie who lived in a gated community in some city...

  • Certified Public Asskicker||

    Wait a minute, there are gated communities in OK?

  • Invisible Finger||

    Indian reservations.

  • tarran||

    I'm not sure why I typed gated community. He said he lives in a highrise with a doorman.

  • some guy||

    Exponential increases aren't necessarily asymptotic or unsustainable. We'll just need to shift to using a log plot soon. That's all.

  • CE||

    Exponential increases are asymptotic by definition. And we're going broke, log chart or no log chart.

  • some guy||

    A vertical asymptote occurs where a function is undefined. So an exponential increase is never asymptotic. The log chart bit was a joke.

  • The Late P Brooks||

    Obama made a huge mistake letting it be used this way before, and it appears he is taking the right course of action this time (telling Boehner to go fuck himself). The question is what leverage does he have to counter the Republicans' apparent willingness to harm every American citizen for petty partisan reasons?

    What about his apparent willingness to spend the nation into insolvency while refusing to make even a pretense of spending cuts?

    Is that an impeachable offense?

  • some guy||

    If the president does it, it's not illegal.

  • Tony||

    The president doesn't spend anything. This president has seen faster deficit reduction than at any time since WWII. You are just repeating slogans. You are not addressing reality.

  • Auric Demonocles||

    If you increase the deficit to the highest level ever with a "one time" spending binge, then slightly bring it back down a fraction of your increase and hold it constant there, you haven't done anything praise worthy.

  • johnl||

    How can Nick claim that Keystone XL has nothing to do with the deficit? It would put people to work paying more taxes. It would put downward pressure on the prices of stuff that the government buys.

  • Tony||

    Bullshit x2.

  • prolefeed||

    If it chooses not to make interest payments on existing debt, it will default on its debt and most people agree that would have catastrophic consequences for both the U.S. and world economies.

    Forcing the fed govt to stop squandering resources and live within just the amount they are currently stealing seems like a GOOD thing to me.

    That statement above makes about as much sense as this, and is roughly analogous: "If the local mafia gang chooses not to make vig payments on existing borrowed money from loan sharks, it will no longer be able to buy as much hookers and blow, and most people agree that would have catastrophic consequences for the people living in the mafia's territory."

  • Auric Demonocles||

    I actually agree that a default would probably have quite a few bad consequences. But since default can easily be avoided simply by paying the interest on the debt (far less than revenues), default has nothing to do with the debt ceiling.

  • prolefeed||

    OK, I'll bite: what bad consequences OVERALL would follow (as in, you can't just talk about the negative effects and ignore the positive effects).

    People who loaned money to the feds get hosed. Bad for them, not for anyone else.

    The fed govt has to lay off a bunch of employees. Bad for those employees, good for everyone else currently forced to pay for them.

    Money and resources currently being inefficiently allocated get funneled to more urgent tasks. Bad for businesses living off the inefficiency, good for everyone else.

    Really, the only bad things I can see happen to people living parasitically off everyone else.

  • Auric Demonocles||

    If you're going to change what I said, I'm not going to argue.

  • Rasilio||

    It is a lot worse than that.

    Those debts are considered assets belonging to someone else. If you default then those assets loose value, potentially a lot of value depending on how big the default.

    Those assets are also then used to secure other debts that their owners owe, if the value of the security falls to low the lender will call the note triggering a new wave of defaults.

    These defaults will hit everywhere simultaneously focused mostly on banks and foreign governments triggering bank runs/failures and currency collapses each of which produces yet more fallout further down the economy.

    A small default of US government debt (less than a 10% haircut for bondholders spread out over 5 years or so) might be able to be managed but if it were significant then it is likely that a global depression rivaling 1929 would be triggered.

  • Auric Demonocles||

    If we raise the debt ceiling will be able to afford alt-text on all the pictures?

  • CE||

    If the "debt ceiling" goes up every time the government wants to borrow more, it's not a ceiling, it's a hat.

  • Paul.||

    In fact, the Democratically controlled Senate didn't even produce a budget document, much less vote on one, for most of the years that Obama was sitting down the street in the White House.

    Jesus, Nick, it's like you've never done this before. Budgets are racist.

  • Auric Demonocles||

    "You think a bunch of old white men should be allowed to tell a black man how much money he is allowed to spend?"

  • Invisible Finger||

    If it chooses not to make interest payments on existing debt, it will default on its debt

    Accounts payable = debt. It doesn't have to be a formal loan.

  • Response||

    I would love to see a similar graph to the presidential one that shows when which parties were in control of congress

  • Casca||

    Why not just pass individual continuing resolutions to fund the individual departments of the federal government, leaving out funds for Obamacare? Let's say you passed a CR for Social Security. Would senate Dems vote against it? Or another one for the military? There's no law that says the House can't send over individual bills regarding spending. I believe there are 15 departments in the federal gov. Just send the Senate a budget bill for each one while omitting any funds for O'care. The senate would have to vote on each one thereby putting their name on any government shutdown.
    This ain't rocket science!

  • Auric Demonocles||

    This is too simple.

  • Juice||

    There's no law that says the House can't send over individual bills regarding spending.

    I think there is.

    http://en.wikipedia.org/wiki/U.....et_process

  • Juice||

    Oh. Nope. Sorry. I misread the article. Carry on.

  • Dan||

    The premise this article is based on is nonsense.

    Not raising the debt ceiling does not mean we default on our debt. The only reason we would default on our debt is if the government chooses to. They would only default if they prioritized other things over paying the debt.

    Besides raising the debt limit doesn't mean they WILL be able to pay the debt anyway. If that were the case then the dozens of times the debt limit has been raised over the last couple of decades should be pushing the debt or at least the deficit down, but it's only skyrocketting. All raising the debt limit does is give them permission to borrow more money which only increases the debt. What the government is doing is nothing more than a ponzy scheme.

  • timb||

    "For years, the debt ceiling typically - though not always - was rubber-stamped by a Congress that, regardless of party, always knew that spending more money was a sure way of getting re-elected."

    Ah, if only Nick. The debt ceiling is just the paying for laws which have already been passed. It's as if Fonzi refused to pay the bill at Al's after he and Richie ordered and ate a pizza. Congress AUTHORIZED spending the money; now they have to pay for it.

    It ain't that hard. Still, always cute to watch Libertarians devolve into anarchists

  • Dan||

    Nonsense. If the money isn't there then they simply don't have the means to enact those laws they passed. You don't incur debt by passing a law. You only incur the debt when you go borrow the money to pay for implementing it.

    Besides the vast majority of government spending is passing spending. They're taking money from one person/entity and giving it to another. Any honest and qualified economist will tell you the economy would be far better off if that stopped. It's nothing but a huge government endorsed ponzy scheme.

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Video Game Nation: How gaming is making America freer – and more fun.
  • Matt Welch: How the left turned against free speech.
  • Nothing Left to Cut? Congress can’t live within their means.
  • And much more.

SUBSCRIBE

advertisement