Debt Ceiling

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

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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.