At the Debt Limit: Congress Should Focus on the Real Budget Crisis
So now we know. In 2013, the administration intentionally misled Congress to “maximize pressure.”
Treasury officials and President Obama claimed that if the government reached the borrowing limit, it would have to delay payments indiscriminately, across the board. It was unworkable, they said, to prioritize spending.
They were using the threat of default to push Congress into raising the debt limit on the administration’s terms. And it worked.
Congress granted the administration a blank check, allowing it to borrow, without limit, through March 15, 2017. And the national debt just surpassed $19 trillion.
Absent congressional guidance, the executive branch has wide discretion to act in the nation’s best interest during a debt limit impasse. The Government Accountability Office confirmed as much back in 1985. But these executive-legislative standoffs are a game of chicken, in which the president’s strongest hand is to threaten default.
That’s exactly what the administration did, despite prudently making plans to avoid such a high-risk scenario.
Treasury officials repeatedly testified that prioritizing payments to avoid default on the debt was “unworkable.” But a House Financial Services Committee investigation has revealed that, not only was the administration technologically capable of prioritization, it had been preparing to do just that in the event of a debt-limit impasse.
At a hearing held last week by the House Financial Services Subcommittee on Oversight and Investigations, Rep. Tom McClintock, California Republican, summarized the investigation’s findings this way: “We now know from documents that were recently uncovered by this committee that this was a deliberate and calculated lie told to increase political pressure on Congress.”
Had the administration been more forthcoming about its contingency planning to avoid sovereign debt default, it would have defused much of the tension of those negotiations. Instead, they continued to conceal their planning, even as public anxiety increased and some members of the Federal Reserve Banks warned that failure to share the administration’s plans was “crazy, counter-productive, and add[ing] risk to an already risky situation.”
Had the administration assured the investor community that it was working on a plan to avoid default, it might have prevented the spike in interest rates leading up to the debt limit deadline. According to a July 2015 GAO report, taxpayers may have incurred “from roughly $38 million to more than $70 million” in additional debt service costs due to investor actions based on uncertainty over whether the government would honor its commitments to its lenders.
But revealing its behind-the-scenes contingency planning would have weakened the administration’s leverage to push Congress into lifting the previous borrowing limit with no strings attached. And so, the deception continued.
Congress seemingly had no way out. Lawmakers have tried numerous times to move legislation that would require the administration to prioritize principal and interest payments at the debt limit, and grant additional borrowing authority for this purpose when needed. Yet the president effectively blocked those efforts by announcing that he would veto any such legislation.
These latest documents confirm that the administration has the tools needed to prevent a sovereign debt default in the event of a debt limit impasse. This means that Congress can reasonably expect the executive branch to prioritize principal and interest payments on the national debt, protecting the full faith and credit of the U.S. above all other spending.
Instead of debating the risk of default, Congress should now focus on the much more productive task of implementing reforms to rein in out of control spending and debt. That means reforming the key drivers of spending and debt — Medicare, Medicaid and Social Security — before increasing the debt limit again.
Congress should also cut unnecessary domestic spending, especially in areas that are better managed on the state, local, and private level. By better prioritizing federal spending programs, Congress can fully provide for the nation’s defense needs and reduce the national debt — without raising taxes.
- 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.
Originally appeared in The Washington Times