Republican Hostage Taking Again

The first thing to know about the “Debt Ceiling” is that it’s artificial and redundant since Congress passed a budget previously that authorized spending. Unlike every other developed nation except Denmark the United States has another step added in the process of funding government known as the “Debt Ceiling” which is simply the limit on the amount of money that the Treasury can borrow to fund government expenditures. The important thing to remember is that the expenditure was previously authorized and has already been committed or spent. It’s unfair to the employees of the government agencies and the companies that the agencies contracted with to then decide not to pay them, which is exactly why the debt ceiling is always raised in the end.

Once the federal budget bill is signed by the President government agencies then, have employees work to provide health care to veterans at VA medical centers, arrange for the construction of F-35 fighters, buy new tires for the vehicles driven by border patrol agents, contract for cleaning of government office buildings and so much more, all within the budget approved by Congress. All those people and companies then did the work they were hired to do. Those employees of both government agencies and private businesses and fairly expect to be paid for their efforts. Failure to allow the Treasury to borrow the money necessary to pay the bills already incurred is both ludicrous and disrespectful to all the workers who will be left unpaid.

Stalling and holding the debt ceiling hostage is a tactic repeatedly used by Republicans over the last 20 years attempting to revisit previously agreed to spending or as in the current case attempting to force the Democratic controlled Senate and White House to agree to accept draconian cuts to Medicare and Social Security. In the past they only thing they’ve been successful at doing is wrecking the nation’s credit rating as was the result of the 2011 standoff which led Standard & Poor's to cut the U.S.'s credit rating, a historic first. Should Congress fail to address the limit this time it will likely cause turmoil in global markets and trigger a worldwide economic downturn.

United States government debt holds a special place in the global economy due to near zero risk of default and is therefore considered “risk free”. The “risk free” status allows the Treasury to borrow at a lower rate than anyone else in the world. If the federal government defaults on its debts that special status will be lost and future borrowing will be more expensive.

Republicans want to change fiscal policy so they should do the responsible thing and pass legislation that does so without disrupting both the U.S. and global economies. Unfortunately for them the reduction in Social Security and Medicare benefits they’re pushing for are not popular with the electorate and certainly not acceptable to President Biden and the Democrat controlled Senate.

Congress should abolish the debt limit and replace it with the simple, common- sense rule that automatically authorizes any borrowing necessary to implement any fiscal legislation that affects the federal deficit. This “Gephardt rule” has been in place at various times in the past and should be made permanent.

As Nobel laureate and economist Paul Krugman puts it Biden and the Democrats should not negotiate with economic terrorists. We know we are going to have to raise the debt ceiling anyway, so why not do it without creating damage to the U.S. and world economies?

Published in the Seguin Gazette – January 25, 2023