“In the past, raising the debt ceiling was routine. Since the 1950s, Congress has always passed it, and every President has signed it. President Reagan did it 18 times. George W. Bush did it 7 times.” – President Barack Obama, July 26, 2011.
In the United States, Congress controls the purse strings. Congress sets the amount of spending that the United States will embark upon, setting the maximum amount with a number called the Debt Ceiling. The Debt Ceiling is a relatively modern concept – before there was an aggregate debt limit, Congress would authorize borrowing one bill at a time. In 1939 and 1941 the Public Debt Acts changed us to the system we have today – where maximum borrowing is authorized in the debt ceiling (and consolidated under the Treasury Department) while bills which spend money are voted on separately.
Today the United States is butting up against the debt limit, and about to surpass the current line in the sand of about $14.29 trillion. It was estimated by the Secretary of the Treasury, Timothy Geithner, that the United States would surpass its borrowing capacity on August 2nd (in 7 days) and be forced to instantly balance its budget with incoming tax receipts. Although not technically a default (the United States can choose to pay off borrowers of its debt with the revenue that is still coming in), it is still a grave event which would leave lots of market participants wondering whether the United States was having a government crisis.
Compounding the problem are the number of entitlement programs which generally rely on continuing revenue. The day after the debt ceiling is hit, on August 3rd, the country is due to send out a number of Social Security checks. Theoretically, of course, the Social Security Trust Fund could sell off public debt since that money is already ‘borrowed’, and wouldn’t count against the limit – but these are uncharted waters, so it is unclear how that mechanism would work.
How Did We Get Here?
You may have heard a lot about mule-headed Republicans, voted into the House of Representatives in 2010. Some of the current crop of Republicans may not be thrilled about increasing the de-facto credit limit of our government, but they are hardly the only ones who can be blamed. Under budget rules put in place in 1974, Congress is required to pass a budget annually. In 2010, Congress could not come to agreement on a budget – so the last budget which was passed was on the 100-day mark of President Obama’s term in office.
As the President said, the debt limit was something that normally, or ‘used to’ happen pretty much automatically. The only really new feature of the current showdown is that the debt limit vote is being used as Republican leverage to put in place cuts to the next ten years of budgets equivalent to the amount of increase in the ceiling – so if $2.7 trillion is requested in increase, they are insisting the country’s deficit is cut by that amount over the next ten years.
Enter Robert Bork
Once upon a time, the Supreme Court worked in a way very similar to the ‘automatic debt increases’. The Supreme Court was pretty much a revolving door, and whomever the President at the time nominated would get a free pass onto the Supreme Court. That all changed with Robert Bork. Bork was nominated to the Court in 1987 by then-President Ronald Reagan. He spawned one of the most famous political tear-downs of history:
“Robert Bork’s America is a land in which women would be forced into back-alley abortions, blacks would sit at segregated lunch counters, rogue police could break down citizens’ doors in midnight raids, schoolchildren could not be taught about evolution, writers and artists could be censored at the whim of the Government, and the doors of the Federal courts would be shut on the fingers of millions of citizens.” – Senator Ted Kennedy
Since then, nominations to the Supreme Court have had a much tougher time being confirmed, with way more partisan bickering and political snipes. Better? Worse? The answer depends on your political affiliation and your idea of how the United States’ Government should work. The same thing applies today – while one who votes most often with the Democratic Party might be a bit miffed by the whole debt limit proceeding, a Republican leaning voter might be happy to see leverage applied. The opposite roles applied during the Robert Bork proceedings.
However, the whole situation does point to the increased politicization of formerly non-political things… and I’d like to see your comments on this article!