Most farmers are familiar with the idea of borrowing money to operate at the beginning of the year, then paying off the note at the end of the year with income from harvest and livestock sales. It’s customary to pay the notes when due, then work on next year’s budget and figure out how much they’ll need to borrow in the spring. That, in a nutshell, is how to solve the problem in Washington over raising the debt ceiling.
Congress can first pass a clean bill to pay last year’s debts and avoid default; then afterward take up next year’s budget. Or they can risk default by taking the time first to negotiate next year’s budget; then move to pay last year’s bills. The first option is the administration’s position. The second is the position of the House of Representatives.
It’s a familiar story: Congress must raise the debt ceiling or they’ll put the nation into default. They’ve fought this same battle many times in previous years. Congress could pass a clean bill today – like they did three times during the Trump Administration. Or they can bring the U.S. to the brink of default like they did in August 2011. Ironically, the same pattern emerged then: a Democratic President and a Republican House of Representatives. That time, they got so close to default, our nation’s credit rating was degraded from AAA to AA by Standford and Poor, and the stock market fell by 17%. Today, with the economy still fragile coming out of the pandemic, defaulting on the debt will be catastrophic.
There is no question vigorous negotiations on next year’s budget are needed. It would be preferable for budget experts to negotiate, rather than extreme House members holding Speaker Kevin McCarthy hostage who make it impossible for him to do anything other than what they tell him to do. There needs to be serious discussions about where cuts can be made in the budget that will not harm the American people. There also needs to be serious discussions about declining revenue, largely caused by huge tax cuts made during the Trump Administration. Anyone who runs a farm or a business knows if you reduce your income, it’s going to be hard to keep paying your bills. Debt piles up quickly, which is exactly what has happened in the last six years in the U.S.
Congress and the Biden Administration are up against a fast-approaching deadline as the Treasury Department predicts we will go into default sometime early June. There are members of Congress who seem to think the Biden Administration is crying wolf about the risk of default, but economists, both Republican and Democrat, are not kidding. They know it will wreck our still fragile economy. President Biden is even thinking about the possibility of preventing default on his own by invoking the 14th Amendment, but he isn’t certain it can be done. The 14th Amendment has a clause that reads, “The validity of the public debt of the United States shall not be questioned,” but Constitutional scholars aren’t certain about its interpretation, either.
Once Congress gets beyond this latest crisis, it would be wise to develop a policy to avoid repeating this controversy every year or so. There needs to be a policy whereby the debt ceiling is raised automatically when needed to pay bills that are due. It would be sensible to have a guarantee that politicians cannot hijack the issue of the debt ceiling in order to pressure the other side to do their bidding on the budget.
Negotiating the budget should be a stand-alone process, preferably accomplished without constant fighting and incessant delays. Republicans habitually blame “big-spending” Democrats for the deficit, while Democrats complain about frequent tax cuts by Republicans that always blow up the deficit. Congress must be far more circumspect about funding programs and eliminating programs, and both parties need to set priorities on how tax dollars are to be spent. Cuts do need to be made but, surely, they can find things to cut other than veterans’ benefits, food stamps, Social Security and mental health care. And both parties must acknowledge the drain on revenue that results from huge tax cuts for corporations and the wealthiest Americans.
But for now, just pay the darn bills.