First we had the proposal for the Treasury Department to mint a couple of $1 trillion coins to evade the national debt ceiling. Then, in early February, Congress approved a bill “suspending” enforcement of the ceiling.
This is how the representatives of "we the people" of the United States address a $16.4 trillion pile of debt that exceeds the value of every good and service produced in this country for an entire year: gimmicks and surrender.
The $1 trillion coin gimmick was eventually dismissed. That the “suspension” of the debt ceiling was proposed by the leadership of the Republican Party and embraced by most of its members, who proclaim belief in smaller and more fiscally responsible government, shows how easy compromise in Washington really is when compromise amounts to surrender to bigger and less representative government.
Until May 19 there will be no enforcement of the debt ceiling, which means the government may borrow to its heart’s content. Until May 19, "we the people" will effectively have no representation regarding how much money the federal government may borrow. On that day the debt limit will automatically be reset to reflect the additional borrowing.
The people’s representatives have washed their hands of all responsibility for the debt until May 19—and perhaps forever.
Some will argue: But the suspension comes with a threat that if lawmakers don’t pass a budget in April, their pay will be put on hold. So our representatives are serious this time.
Unfortunately, we’ve heard this kind of talk before. Congress’ suspension of the debt ceiling enforcement to came barely three weeks after they agreed to extend the “fiscal cliff” deadline. That original fiscal cliff deadline was the result of an earlier agreement to force spending cuts and tax increases on Jan. 1 if no deal was reached -- the thinking being no one would want to go over the cliff, and therefore a deal would happen. It didn’t and hasn’t.
The Senate has gone more than three years without approving a budget. If the government has operated all those years without a budget, and the original fiscal cliff deadline could be extended, and the debt ceiling can be suspended, what’s to stop them from extending the suspension? What’s to force them ever to reinstate the debt ceiling? Democrats who control the Senate can say “no deal” on a budget and threaten government debt default. If past behavior is any guide, Republicans will fold like a broken card table.
Let’s remember why there is a debt ceiling. Congress agreed to a debt ceiling under their control to mollify opponents of the creation of the Federal Reserve in 1913. Those opponents feared a central bank that could buy government debt would lead to government borrowing binges. The Fed in the past few years has created more than $2 trillion of new money by tapping digits on a computer keyboard to buy government debt and other assets, thus making possible the government’s current borrowing binge. Approximately 40 cents of every dollar the government spends is borrowed money.
With enforcement of the debt ceiling suspended—and possibly becoming permanent—the worst fears of Federal Reserve opponents are coming true.
President Obama has declared his desire to have no debt ceiling. This suspension of enforcement may be a sign he has gotten his wish. We can only hope Republicans in Congress will rally and actually impose real enforcement when the issue comes up for debate again in May.
Steve Stanek is a research fellow at The Heartland Institute.