Last week, we told you about many important issues that Democrats have on their plate in the lame duck session. For this week’s Closer Look, we’re going to dive a little deeper into one of the most important things Democrats should be prioritizing in the three weeks before they officially lose control of the House: fixing (AKA eliminating) the debt ceiling.
Established by Congress in 1939, the debt ceiling is the maximum amount of money that the federal government is allowed to borrow to pay its debts. Today, the debt ceiling stands at $31.4 trillion, an amount that the government is projected to reach sometime next year.
Under a normal, responsible government, approaching that limit wouldn’t be an issue. Congress would, as it has always done in the past, simply raise the limit and allow the government to continue to borrow money. But with Republicans taking the House, and a significant portion of their caucus now consisting of radical, unstable members like Marjorie Taylor Greene and Lauren Boebert, Democrats can’t count on the next Congress to act responsibly. They must act now and either significantly raise the debt ceiling or, as we prefer, eliminate it entirely.
Some Democrats have said they want to push this fight off until next year, but that would be a huge mistake. Doing nothing in the lame duck would be asking for disaster.
To understand why we should eliminate the debt ceiling, let’s talk about what would happen if the US government hit the ceiling and defaulted on its debt. To put it simply, the results would be catastrophic. A default would cause gaps in payment for everything from salaries of government employees to Social Security payments to utility bills for government buildings, bringing great financial harm to millions of working families already suffering greatly under the massive weight of record-breaking inflation. According to a report by Moody’s Analytics, as many as 6 million jobs and $15 trillion in household wealth would be lost as a result of a default. Furthermore, the fallout would not be contained to American shores. Because the global financial system relies on US Treasuries as a safe asset, a default could trigger a global financial crisis. This cannot be allowed to happen.
Avoiding a default should be priority number one for Congress in dealing with the debt ceiling. However, if history is a guide, even coming close to hitting the debt ceiling should be avoided at all costs. Back in 2011, Republicans and Democrats passed the Budget Control Act, which raised the debt ceiling and avoided default. But their legislative action was so last minute and the partisan standoff so intense that it prompted credit agency Standard and Poor’s to historically downgrade the US’s perfect AAA credit rating to AA+, which sent stock markets tumbling.
Even if we avoid a default, the concessions needed to get to another debt ceiling increase in a divided Congress could be hugely damaging. In the negotiations over the Budget Control Act, Republicans successfully used the debt ceiling as leverage to extract cuts from Democrats to vital social programs like education, housing, and the environment. If Democrats do not take action in the next few weeks, we may see a repeat of the 2011 catastrophe.
Republicans will control the House, and many of them – including House Speaker hopeful Kevin McCarthy – have already made it clear that they will demand significant spending cuts to things like Social Security and Medicare in exchange for lifting the debt ceiling. Rep. Chip Roy of Texas recently went so far as to call funding for some entitlement programs “fat and garbage.” Clearly, they are planning on holding the entire global economy hostage to extract cuts for programs that millions of Americans rely on. Democrats have the power to stop them, but they must act NOW. They cannot wait until next year and hope that Republicans will cave at the last minute.
Democrats should either raise the debt ceiling to an astronomical amount that the Treasury would never realistically hit or they should follow the example of most other Western countries and eliminate it entirely. It is an artificial barrier that has not existed for a significant portion of our country’s history, and that almost no other country in the world employs for a reason. It serves no real purpose. All it does is continually put the US economy at risk while politicians play chicken. If Democrats were to completely eliminate the debt ceiling, it would only be a net positive.
And just to be clear, since we’re sure to hear lots of talk from Republicans about the size of the debt and how irresponsible it is to borrow more money, the debt ceiling has absolutely nothing to do with fiscal responsibility or limiting government spending — it’s about paying for things that Congress has already allocated funds for. If Republican lawmakers are concerned about limiting government spending, the appropriate time to act on that belief is when Congress is deciding to spend that money, not when the entire American economy is about to melt down if the Treasury is not authorized to keep the government afloat.
The battle over the debt ceiling is, to put it plainly, one of the stupidest recurring fights in Washington. There is no credible argument for not raising the debt ceiling. This is about good governance and fulfilling our obligation to pay our bills – not rewarding lawmakers who are willing to hold the country’s economy hostage in order to score cheap political points.
If Democrats don’t fix the debt ceiling, there is a very good chance that House Republicans will either push the US into a default, causing immense amounts of economic suffering both at home and across the globe, or will force Democrats to accept significant cuts to vital programs like Medicare, Medicaid, or Social Security in order to avert a default. Democrats have the power to avoid this fight entirely, but they have to pull themselves together and act fast to either raise or eliminate the debt ceiling before the holidays.