At that time, the debt ceiling was roughly half of what it is today. The country needed to increase the ceiling to avoid a default. Nevertheless, all of the Senate’s Democrats, including Mr. Reid and Mr. Obama, voted no. Mr. Reid called the increase “fiscally irresponsible.”
As a senator, Mr. Obama stated: “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government’s reckless fiscal policies. Increasing America’s debt weakens us domestically and internationally. Leadership means that the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.”
It was all just a big mistake, according to President Obama’s White House. Today, he says that the debt ceiling is not something you “can play around with.” To make matters worse, he is vilifying Republicans for exactly what he and Mr. Reid said — and did — seven years ago.
The irony is that the government’s debt problem has gotten so much worse during the last seven years. The debt ceiling back then was more than $8 trillion, and today it has increased to nearly $17 trillion. While not all of that debt is held by the public, entitlements will consume that difference in less than a generation. The only reason the country can afford its debt now is that the Federal Reserve is buying most of the new borrowing. That cannot last. On its current trajectory, the fiscal posture of the United States is both reckless and unmanageable. The debt held by the public will more than double under Mr. Obama’s presidency, and the Congressional Budget Office recently estimated that it will reach 100 percent of gross domestic product (GDP) in 25 years. Just paying the interest on that debt will strangle the country and future generations of Americans. That truly is fiscal irresponsibility.
Unless something serious is done about the federal government’s debt, default (as that term is now very loosely used) is inevitable. It is not a question of whether, but when. When politicians try to tell you that default is not an option, they might mean exactly what they say. As anyone with any financial experience can tell you, too much debt — particularly debt exposed to fluctuating interest rates — can be a very dangerous problem. The country is in the danger zone. There is no such thing as viable unlimited borrowing, even for the federal government.
Debt is a pernicious master. The 13th Amendment to the Constitution not only prohibits slavery, it also prohibits debt-compelled involuntary servitude. The continuing failure to address the government’s debt problem will condemn future generations of Americans to the shackles of Washington’s chronic fiscal irresponsibility, just as Mr. Obama recognized as a senator in 2006.
His position on this now is that “[w]e’re not going to negotiate under the threat of economic catastrophe.” This means, of course, that he won’t negotiate over the debt at all, with or without action on the debt ceiling. You have to be utterly delusional to think that the projected growth of the debt doesn’t present the threat of economic catastrophe. His position today is the very definition of hypocrisy.
The Constitution very deliberately vests the power to borrow money in the Congress, not the executive. Placing the power of the purse in the people’s representatives was perceived as an essential bulwark against tyranny. It still is. It would be an abdication of the responsibility of Congress to give a spendthrift government a blank check to borrow money on the taxpayer’s credit. Its habit of rolling over the ceiling is doing exactly that.
Congress must start to get the debt under control. It is not so much the total debt — which includes intergovernmental borrowing — that poses the threat of catastrophe to the country. Rather, it is the amount of government debt held by the so-called public, both domestic and foreign. Congress must regulate the debt that government has outstanding, which is the debt sold to the public. Most economists are willing to tell you how much of that debt is sustainable. The administration apparently does not care.
A multiyear bill regulating and limiting the amount of debt that government can sell to the public would establish a program for a sustainable fiscal future for the United States. It should identify how much debt in relation to GDP the country can afford, and realistically assess the likely growth in the economy in the years ahead. One hundred percent of GDP in 2038 clearly is not responsible or manageable. Congress can work its way backward to where we are today, and establish public debt limits for each of the next 25 years. They can be adjusted from time to time by legislation, but at least it is a fiscal framework that we do not have now. If members of Congress can do this, their children and grandchildren will bless them, for they will have preserved their future and saved the nation. It would mean nothing less than that.
Unfortunately, it appears unrealistic to think that this administration will participate in that discussion. It needs to take place anyway. The nation’s future is not something you should play around with.
Warren L. Dean Jr. is an adjunct professor of law at Georgetown University Law Center.