October 22, 2015

October 22, 2015 | Commentary on Debt Ceiling, Federal Spending

The Debt Ceiling Cometh: Another Chance to Rein In Spending

The debt limit is fast approaching and once again, it has Washington in frenzy.

As always, pundits are focused on the political drama: Will Congress be able to avoid the hyped doomsday scenario of “default” and, if so, when? Unfortunately, the bigger questions of whether and when Congress will gain control of the $18.1 trillion-and-growing national debt go unasked and unanswered.

The real key to understanding debt limit dynamics is to grasp that Congress is of two minds when it comes to spending and the debt. Fiscal conservatives in Congress will decry the steep increase in the debt since the Great Recession; at the same time, they are largely unwilling to champion budget reforms that would curb its growth.

This was made crystal clear last April, when Congress passed a plan to balance the budget before the end of the decade and then, just one day later, passed legislation to increase the deficit over that same timeframe. While Congress’ budget proposed reducing spending by $5.4 trillion (compared to current baseline spending projections), Congress enacted legislation to address the Medicare sustainable growth rate formula (the “doc-fix”), which increased the deficit by $174 billion.

Promises to balance the budget are cheap when Congress does not have to follow through.

This is one of Washington’s dirty secrets. Members of Congress get to claim credit for passing a budget that balances without being held to the task of actually accomplishing this feat.

Congress’ budget plan merely establishes a blueprint for balancing the budget. Without separate legislation to implement the reforms and spending cuts it calls for, the plan is simply a collection of non-binding messages about policy priorities—nothing more. A balanced budget remains elusive.

The debt limit presents Congress with a separate opportunity to take legislative action that will put us on a path to fiscal balance.

It is not uncommon for lawmakers to leverage the debt limit to enact deficit-reduction legislation. Examples include the Budget Control Act of 2011, which raised the debt limit in exchange for dollar-for-dollar cuts in spending, and the Balanced Budget and Emergency Deficit Control Act of 1985 (Gramm-Rudman-Hollings), which raised the debt limit in exchange for a five-year plan to balance the budget.

The debt limit represents a highly focused opportunity to revisit how government policies affect spending and deficits. It forces Congress to confront growing debt at regular intervals—each time affording lawmakers an opportunity to enact policies to control spending and debt.

So how could Congress leverage this bump against the debt ceiling to make long-overdue spending reforms? One way is to enact spending caps in line with Congress’s budget to pave the way for concrete reforms with the threat of automatic cuts. Such a statutory spending cap would encourage lawmakers to prioritize federal spending, enable them to say “no” to special interests, and help to protect American taxpayers from wasteful spending burdens.

Lawmakers should build on the success of the Budget Control Act and its spending caps enforced by sequestration to motivate entitlement reforms.

Rep. Kevin Brady (R-TX) recently reintroduced the Maximizing America’s Prosperity Act (H.R. 2471), which would impose a statutory spending cap across all non-interest outlays, in line with the spending targets established in Congress’s budget resolution, and enforced by discretionary sequestration.

Meanwhile, some lawmakers are pursuing a strategy of partially defanging the debt limit by allowing the administration to borrow at the debt limit for the purpose of servicing the debt (and thereby avoiding default), and to pay Social Security beneficiaries. Dubbed the Default Prevention Act, the bill championed by Rep. Paul Ryan is merely a temporary Band-Aid for a gushing wound.

Enacting something like the Default Prevention Act may help assuage the largely unfounded fears that hitting the debt limit will force the government to default on essential obligations. But while that might help refocus the debate on what’s truly at stake as the government falls behind on other payments, it can’t make lawmakers want to actually balance the budget. That remains by far the bigger challenge.

-Romina Boccia is The Heritage Foundation’s Grover M. Hermann research fellow in federal budgetary affairs and the deputy director of its Roe Institute for Economic Policy Studies.

About the Author

Romina Boccia Deputy Director, Thomas A. Roe Institute for Economic Policy Studies and Grover M. Hermann Research Fellow
Thomas A. Roe Institute for Economic Policy Studies

This piece originally appeared in The National Interest