ProPublica

Journalism in the Public Interest

Cancel

The Basics Behind the Debt Limit Debate: More Partisan Than Practical?

.

Justin Sullivan/Getty Images file photo

As you may have heard, the federal government hit its $14.3 trillion debt limit yesterday—something the Treasury has been warning Congress about for months. There are a lot of good explainers out there about what this could mean. Some dig into what actions the Treasury might take; others into the oh-so-exciting history of the debt limit.

We’ve waded through them and pulled what we found to be the clearest explanations not only of what the debt ceiling is and how it works, but also the fundamentals of whether it’s necessary and why this debate may be more partisan than it is practical.

What is the debt ceiling, really?

Our friends at NPR’s Planet Money have the best explanation of this that I’ve heard. Last Friday’s podcast is worth listening to in full, but their description of the debt ceiling as a game of “Mother, May I?” is particularly helpful.

The game began in the early 1900’s, when Congress delegated to the executive branch the job of figuring out how much borrowing the federal government will need. It also gave Treasury an upper limit in order to retain some congressional control. Here’s Planet Money:

There’s something crucial to understand here. Nothing gets bought by the federal government unless Congress says so. It’s in the Constitution—the power of the purse rests with Congress. So the debt limit doesn’t actually limit the spending. It would be unconstitutional to limit the spending. It’s a safety check.

You know, I think of it as this big game of “Mother, May I?”—that old kids’ game. Congress says to the Treasury Department, “We want to buy a tank.” And Treasury looks at it and it brings us over the debt limit, and the Treasury Department has to come back to Congress and say, “Mother may I buy a tank and raise the debt limit?” And Congress votes and says, “Yes you may.” But what’s so ridiculous is that all that Treasury is asking approval to do is spend the money that Congress has told them to spend. Congress says, “Go spend this money” and acts all huffy that spending the money that Congress approved is going to get us over the debt ceiling.

So, is the debt ceiling necessary?

“Strictly speaking,” writes Slate’s Annie Lowrey, the debt ceiling is not a necessary budget tool. “By itself, it does nothing to keep the country from running into the red.”

A Congressional Research Service report notes that some budget experts have argued for getting rid of it [PDF], because the debt limit doesn’t actually change or limit spending—Congress has already authorized that spending. What it does is limit whether the federal government is allowed to pay for what it’s already spent. 

The debt limit does haves defenders, who believe it has some symbolic power. According to the report, the limit “imposes a form of fiscal accountability” by forcing Congress and president “to take visible action” when the federal government spends more than it takes in:

In the words of one author, the debt limit “expresses a national devotion to the idea of thrift and to economical management of the fiscal affairs of the government.”

Where do people stand on the debt limit?

Most lawmakers—Democrat or Republican—agree that the limit needs to be raised, but they disagree on the details of what deficit-reduction measures should be attached to a debt limit deal. Reuters has a good rundown of where key leaders in each party stand.

For instance, Senate Democratic leader Harry Reid opposes making Social Security part of the discussion and favors setting targets to reduce the deficit over time. Other Democrats have called for closing tax code loopholes.

House Speaker John Boehner said last week Republicans want trillions in spending cuts in exchange for supporting a debt limit increase. But he has also said that he believes raising the debt ceiling is “necessary.” “It’s clear to me that at some point we’re going to have to raise the debt ceiling,” Boehner said in a TV appearance Sunday.

The Tea Party, on the other hand, has taken a hard line on raising the limit. “Our message has not only been no, but hell no,” Tea Party Express chairwoman Amy Kremer told ABC News. Rep. Michele Bachman, a Republican and Tea Party member, has said she’ll oppose a debt limit increase unless it includes a repeal of last year’s health care law, Reuters noted.

More than 60 trade groups—ranging from Wall Street to manufacturing—have called on Congress to raise the debt limit

What would happen if Congress doesn’t raise the debt limit?

The Wall Street Journal’s FAQ says that government services will go mostly uninterrupted for the time being while Treasury works to conserve cash and keep paying its bills:

It has stopped issuing certain debt for state and local governments. Among other things, it can stop payments into the Civil Service Retirement system, redeem existing investment, and stop reinvestment in the exchange stabilization fund, which buys and sells foreign currencies.

The Los Angeles Times calls it a “complex fiscal juggling act” involving accounting tricks such as borrowing from federal employee pension funds.

When Treasury has done all it can and runs out of cash to pay its bills, that’s considered a default. What happens when the United States defaults is difficult to predict because it’s never happened, but the Treasury Department has warned that payments to service members, citizens, investors and businesses would be affected.

In a letter to Sen. Michael Bennet of Colorado last week, Treasury Sec. Timothy Geithner warned that defaulting would “inflict catastrophic, far-reaching damage” [PDF] to the economy—reducing growth, increasing unemployment and potentially increasing borrowing costs for the United States in the future.

So, why isn’t Congress doing it already?

One primary reason seems to be—surprise, surprise—partisanship.

“There’s always a little political theater around this,” Geithner said back in February. (That was before this debt ceiling debate had heated up, and it was even before the budget showdown/near-government-shutdown had started looking like a serious possibility.)

This New York Times graph lays out the politics of the matter pretty succinctly, and Ezra Klein explains the graph further. Basically, it depends on which party is in power in the White House and the two houses of Congress. “When Republicans are in charge, they vote to raise the debt ceiling,” Klein writes. “When Democrats are in charge, they vote to raise the debt ceiling.” Imagine that.

While we’re on the subject, it’s also worth noting that back when the Republicans controlled the White House, House and Senate in 2006, then-Sen. Obama in fact voted with his party against raising the debt limit. At the time, he called it a “sign of leadership failure” that they were even debating the matter.

That’s a quote that Obama’s political opponents are all too happy to repeat back to him now. White House spokesman Jay Carney has said the president now “thinks it was a mistake” to vote against the measure.

So, how long until Congress figures this out?

If the 2011 budget fight was any indication, there’s no telling how long Congress will take. The clock is ticking, though. The Treasury Department has said that if the debt ceiling isn’t raised, the United States will default by August 2—11 weeks from now.

Both sides have said that failure is not an option, but reports seem to indicate that they’re also not anywhere close to reaching a deal.

You might want to add that it is unconstitutional for the US government to default on the debt.  Please see the 14th amendment.

Brian Blessington

May 17, 2011, 12:56 p.m.

@Jay You might want to go re-read the 14th amendment. Section 4 was put there so that the US federal government didn’t have to pay for the reconstruction of the south post Civil War and gives legitimacy to the concept of public debt. It doesn’t somehow make the US un-defaultable.

OK- this is my uneducated, unsophisticated and undoubtedly oversimplified “take” on the debt ceiling vote. It needs to be a clean up-down vote- NO attachments; NO qualifiers; NO nothing. If this is $$ that was already authorized by Congress, then the commitments have been made. If they want to talk about budgets and deficits and what is important for a government- of, by, and for the people- to fund, then that is a separate discussion. Since virtually every member in the Regressive Party and the regressives in the Democratic Party seem to have “issues” with what a government of, by and for the people fund and don’t appear to want to raise the debt ceiling, then Treasury needs to start dealing with the matter now obviously. My (again, unsophisticated) sense of equitably dealing with this type of black-mail is to rank what needs to happen first or simultaneously and then last. So… 1) STOP salaries, benefits- including insurance payments, expense accounts and office accounts for every elected member of Congress and the White House. Personally, I think this should also include anyone who is not part of the classified federal workforce too. This IS NOT $$ that will be reimbursed should Congress finally take a clean vote. 2) At the same time, we need to start to bring troops home from Afghanistan, Iraq etc.  NOW and STOP FUNDING WAR-MAKING (We don’t want to have our troops having to hitch-hike from 1/2 way across the world, hauling all those military supplies behind them because we’ve run out of $$!). This should allow us to pay the troops and cover medical expenses for them, their families & our veterans. Part of stopping the war-making would be of course to stop funding our longest and most ineffectual war here at home- the “War” on drugs.  Defense contractors of course would also be defunded. Maybe we could put some of them in jail instead which would be a more just way to meet their contracted expenses. 3) At some point early on, if not simultaneously, any sort of government payments to former politicians should stop… hopefully, we can restore them, since we did kind of promise to pay them. 4) tax refunds, tax stipends etc for large corporations and multi-nationals would be held up and possibly revoked.  The intent would be that the people most responsible for damaging our country, our people, our economy should 1st and foremost be the ones to pony up. This plan could go into effect if the debt ceiling vote was not taken care of by the end of the month… so the House better get back to work! No more of this 2 weeks on- one week off shi-!  I realize this would be a difficult proposition to undertake. If little Timmy Geitner had to take $$ away from the rich and powerful, he might have a stroke! Maybe Elizabeth Warren would have to be temporarily reassigned to a duel role… we would want to make sure that consumers were protected, after all. It’s the American Way!

You said the Executive Branch can’t spend money that Congress (and the President) have not passed into law. It’s also true that, in order to spend less than the law requires, another, rescission law must be passed. I don’t think the debt limit qualifies as a rescission law, so I suggest that obeying the debt limit by not spending money required by law to be spent is unconstitutional.

Could it be that this issue of raising the debt ceiling or not is nothing more than an attention grabbing ploy by the dominant political parties in America?
We as a people now have so much access to media that it forces government to create this fear and hysteria about impending doom to catch our attention.
I wish we all started acting our age and really do the right thing.
We spend enough on education to expect less than real maturity in solving the nation’s problems.
I hope we have not become an elitist nation taking care of only its elite.
That would be a shot to the bow of the democratic ship of state.

“Debt Ceiling” is just another republican “catch phrase” to fool their middleclass voters into believing they are doing something for them instead of raping them at every possible chance. “Abortion”, “States Rights” various other alleged social issues etc, etc etc, It just goes on and on. George Wallace would be proud. He invented this 50 years ago and it continues to work with the uneducated or undereducated fools that visit the ballot box.

Obama was correct, it is a “sign of leadership failure”.

Correction on my last post: The US Treasury failed to pay some Treasury bills in 1979. See the article below.

http://www.csmonitor.com/Business/Donald-Marron/2011/0526/The-day-the-US-defaulted-on-treasury-bills

One thing nobody talks about is reducing the war budget. 2 megabucks per minute - 3 gigabucks per day. They just past an increase. They are talking about slowing the doubling rate from ten years to maybe 15, but soon we’ll have to increase taxes if we want to: 1] maintain the absolutely necessary 1000+ bases we have overseas protecting freedomn and democracy, 2] continue matching the rest of the world’s military spending. 3] Continue to bomb or occupy a half dozen countries or 4] attack a country that actually has an army we don’t out power hundreds to one.

I have been an independant for years. Pick and choose. But I’m not a tea party anybody.
We can’t un-do overnight what took many years of greed/need.  As we reduce the federal goverment that effects each state that is required to submit a balanced budget more and more is lost and costs is simply sky rocketing.
I don’t blame the states but as the pork is reduced, the internal deals come to an end. period. No more, I’ll do this for you if you do this for me.
sighing an agreement “not ” to approve any form of tax increases is beyond belief.. Sort of like signing an agreement not to enter into another war(god forbid) then being invaded by another country.

The federal goverment is not like an enemy to the us citizens it was created by the people for the people

Perhaps it is to big, but the real question is why. I think the real need is to protect us from the evils of our own doings.

I don’t know if true but if any congress rep/ including our president is rejecting an increase to protect us, the citizens of this country for personal gain or position then they should be removed!

This last few years we have had some major disasters hit this country.
Moneys have been promised by the federal goverment(us) tio help those areas recover..THAT IS BORROWED MONEYS) so when you think that by turning down a long increase in the national debt ceiling is a wonderful thing…Then don’t go looking for any help!

If your in a mortage crisis, out of work and looking for a paycheck, live on social security, expect help to recover from war disabilities, own what you thought was a nest egg in the stock market for you future, expect public schools to continue to be free as limited as they have and continue to become.. State taxes to remain at the present level then cheer on the anti debt ceiling increase but don’t complain later and for Gosh sakes take in the people dependant on this federal goverment at no cost and personally cover their costs no matter what!

I beg you, contact your congress and tell them to vote yes to increae, and not just for 6 months..We have a major election coming, you can make changes then but this is really a no brainer!
thankyou for at least reading

I wrote my congressman this morning.  I basically told him that it was time for the “older” members of congress to lead instead of follow.  I also told him that if he was presented with a “pledge” to never increase taxes he should have been insulted rather than meekly signing away his responsibility to represent his constituency.

I would ask that other readers that agree with my statement to write a similar letter to their congressman.

The treasury takes in more than enough tax money to pay off bondholders.  If bondholders get paid on time, there is no default.  The only way the U.S. government could default is if the President of the United States, told his treasury secretary not to pay bondholders.  This is all about scaring the people of this country; especially the elderly.

Obama said he couldn’t guarantee that Social Security checks would go out if this issue wasn’t resolved by next week. He lied when he said there wasn’t enough money. It is his decision what will be paid no matter if a bill is passed to raise the debt ceiling or not. It is typical Obama rhetoric when he doesn’t get his way.

We need a leader, not a petulant child to lead our country.

If the goverment takes in enough moneys thru taxes and has a reserve
supply then could someone please explain why we’re borrowing moneys from countries like china to continue to run our goverment?
Why we’re even discussing a national debt of over 14 trillion dollars and raising the ceiling? why we pay only 42 cents per dollar printed..Why presidents before Obama raised the national debt ceiling and in many cases many times?..Why so many believe this just accured during the 3 years (give or take) Obama has been the oresident? why the outside free world is holding it’s breath over what we decided to do? Why and why and why?

Add a comment

Email me when someone responds to this article.

Get Updates

Stay on top of what we’re working on by subscribing to our email digest.

optional

Our Hottest Stories

  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •  
  •