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Debt Limit Avoided -- For 6 More Weeks
Oct. 7th, 2021 09:18 pmSomething called the Debt Ceiling has been in US politics news this week. Actually it's been in the news since July but it's reached fever pitch this week. What is the debt ceiling, and what do recent events around it mean? As I fact-checked a few things for this blog post I realized it's even more complex than I thought— and I already knew more about it than most people. I'll try to distill it down to only Five Things.
1) What is the Debt Ceiling?
The US government borrows a lot of money because it usually spends more than it collects. In the past 52 years the government has had to borrow money to fund its spending in all but 4 years. The debt ceiling is a statutory limit on the total amount of debt the government can have.
2) Pick your poison: bad things happen when we hit the limit.
When the US government hits the debt limit it can't borrow more money. This would provoke an instant crisis as the government would have to seriously reduce its spending. Government employees, including military service members, could have to go without pay; government offices may be shut temporarily and workers sent home without pay; or the government could even default on outstanding debt by not paying interest on it. Basically there are no good options for how to curtail a large fraction spending planned in the budget. And sadly these crises have become common.
3) A paltry 6-week extension just passed.
Today the Senate approved a small increase to the debt limit. The old limit was $28.4 trillion. The Senate's act upped it by $480 billion. Treasury Secretary Janet Yellen estimates that extends the government's financial runway from October 16— when we'd hit the old limit— to December 3. That's only 6 more weeks!
4) Why was/is this so hard?
Fighting over the debt limit has become a perennial partisan issue. Republicans argue it is a check on runaway spending, yet they increased the debt limit 3 times during President Trump's administration with zero self awareness of their biting hypocrisy. In this fight they were once again threatening to use the Senate's filibuster rule— which requires 60 votes to allow legislation to proceed— to stymie the Democrats' narrow, 50 seat majority from upping the limit. The idea was Republicans would (once again demand major concessions in exchange for not blowing up the government. Except this time Senate Minority Leader Mitch McConnell blinked. He wrangled together 11 members of his party (including himself) to join every Democrat in defeating the filibuster with 61 votes. Note, that's just the vote to hold a vote. The debt limit increase itself passed on a strict party-line vote, 50-48.
5) What we should do is scrap the debt limit.
Frankly we should scrap the debt ceiling. The US is close to unique for having a debt limit that stands as a piece of legislation separate from budget acts. Per my research only a handful or so of countries have separate debt ceilings. Ours was enacted in the 1930s arguably as a good-governance safeguard. Instead it's been turned into a partisan weapon wielded on a regular basis by an increasingly nihilist Republican party willing to hold the country hostage to its demands.
1) What is the Debt Ceiling?
The US government borrows a lot of money because it usually spends more than it collects. In the past 52 years the government has had to borrow money to fund its spending in all but 4 years. The debt ceiling is a statutory limit on the total amount of debt the government can have.
2) Pick your poison: bad things happen when we hit the limit.
When the US government hits the debt limit it can't borrow more money. This would provoke an instant crisis as the government would have to seriously reduce its spending. Government employees, including military service members, could have to go without pay; government offices may be shut temporarily and workers sent home without pay; or the government could even default on outstanding debt by not paying interest on it. Basically there are no good options for how to curtail a large fraction spending planned in the budget. And sadly these crises have become common.
3) A paltry 6-week extension just passed.
Today the Senate approved a small increase to the debt limit. The old limit was $28.4 trillion. The Senate's act upped it by $480 billion. Treasury Secretary Janet Yellen estimates that extends the government's financial runway from October 16— when we'd hit the old limit— to December 3. That's only 6 more weeks!
4) Why was/is this so hard?
Fighting over the debt limit has become a perennial partisan issue. Republicans argue it is a check on runaway spending, yet they increased the debt limit 3 times during President Trump's administration with zero self awareness of their biting hypocrisy. In this fight they were once again threatening to use the Senate's filibuster rule— which requires 60 votes to allow legislation to proceed— to stymie the Democrats' narrow, 50 seat majority from upping the limit. The idea was Republicans would (once again demand major concessions in exchange for not blowing up the government. Except this time Senate Minority Leader Mitch McConnell blinked. He wrangled together 11 members of his party (including himself) to join every Democrat in defeating the filibuster with 61 votes. Note, that's just the vote to hold a vote. The debt limit increase itself passed on a strict party-line vote, 50-48.
5) What we should do is scrap the debt limit.
Frankly we should scrap the debt ceiling. The US is close to unique for having a debt limit that stands as a piece of legislation separate from budget acts. Per my research only a handful or so of countries have separate debt ceilings. Ours was enacted in the 1930s arguably as a good-governance safeguard. Instead it's been turned into a partisan weapon wielded on a regular basis by an increasingly nihilist Republican party willing to hold the country hostage to its demands.
