The federal debt ceiling was created by Congress in 1917 to limit the government’s ability to operate on borrowed money. The objective was to limit deficit spending, but that objective has never been achieved. While the debt limit has produced little of a positive nature, it has tremendous potential to ruin the U.S. economy.
I first learned of the debt ceiling in June 1970, when President Nixon asked Congress to increase the Treasury’s borrowing authority by $18 billion (from $377 billion to $395 billion), partly to cover Vietnam War debt. I was working for Sen. Len Jordan (R-Idaho). Some other Senate Republicans were speaking out against the bill, and we were getting lots of constituent mail in opposition.
Jordan told me in no uncertain terms that he would vote for the increase. He said that we had no alternative — the debt had already been incurred, and we had to pay the bills. The only way to do that was to borrow the money by issuing government securities. He said those who opposed it were just posturing and should know better.
In the 51 years since that hike, the debt ceiling has been raised or suspended about 63 times. Generally, an increase is handled as a bipartisan housekeeping measure, but in recent years Republicans have taken to using a necessary debt limit increase to falsely posture as fiscal conservatives. Senate Republicans have now made it known that they will not lift a finger to increase the current limit, even though the GOP is largely to blame for incurring the debt.
The national debt rose by about $7.8 trillion during the Trump presidency and now stands at $28.4 trillion. The debt limit was suspended on bipartisan votes of Congress three times in Trump’s tenure — December 2017, March 2019 and August 2019. The debt grew by $5.4 trillion from the last suspension until Trump left office. The 2017 tax cuts, which mostly benefited the rich, will continue to add to the debt at a rate of $200 billion-$300 billion per year until at least 2026.
If Senate Republicans hold fast to their promise to let the country default on its debt obligations, economic hell could break loose in mid-October. Chaos could erupt if the U.S. defaults — “plunging stock values, the stirrings of a global financial crisis, an erosion of America’s credibility when it comes to honoring its debts,” according to one economist. Even if Republican senators approve a debt increase after a default, America’s creditworthiness would take a major, lasting hit.
Instead of turning the U.S. into a deadbeat that does not pay its bills, it would make more sense to reconfigure the limit by raising more revenue to pay the debt. That is, Congress should provide that an immediate tax increase on the wealthiest Americans would be triggered at a time certain before reaching the then-current limit so that the country could continue paying its legitimate expenses. That would certainly cause Congress to take immediate corrective action.
Some legal commentators contend that the president can ignore the debt limit and continue borrowing money to pay government obligations. Section 4 of the 14th Amendment to the U.S. Constitution says, in part, the “validity of the public debt of the United States, authorized by law…shall not be questioned.” Section 4 was “based on fears that a future Congress dominated by formerly Confederate states would repudiate federal debt.”
It is interesting that 18 of the GOP senators opposing an increase in the present debt limit represent former Confederate states. They and their Republican colleagues, the argument goes, are questioning the public debt in violation of Section 4 by imposing an artificial limit on the payment of public indebtedness that has been authorized by laws passed by Congress and signed by the president. Therefore, the debt ceiling violates the Constitution and can simply be ignored by the president.
This argument seems to have merit, but there is a common perception that the debt limit must have some sort of validity, as evidenced by the hard-fought political battles waged over increases in 2011 and 2013. If the president does adopt the position that the debt limit is a nullity by virtue of the 14th Amendment, there will likely be lingering fears about the soundness of investment in American securities and attendant financial uncertainty, not to mention an inevitable raft of legal challenges.
The best solution to the debt ceiling dilemma is that suggested by Treasury Secretary Janet Yellen — just abolish the worthless thing. Keeping the debt limit artifice on the law books for misuse by political misfits is like keeping a loaded gun in your kid’s toy box. It serves no useful purpose but could have tragic consequences.
Jim Jones is a Vietnam combat veteran who served eight years as Idaho attorney general (1983-1991) and 12 years on the Idaho Supreme Court (2005-2017).