We’ve all seen it in the movies — that super-awkward moment when someone’s credit card is cut in half before their eyes in a very embarrassing scene in the middle of a store. It is the classic Hollywood consequence for going over your limit.
Just like Americans have limits on their credit cards, the United States has a legal debt ceiling it cannot go over. America, our credit card is almost full, and it is time for a change.
We need a plan to immediately raise our legal debt ceiling, or the consequences could be far greater than embarrassment — they could even be catastrophic. Congress has already spent the money, now it’s just debating whether to pay the bill.
If America were to hit its debt ceiling, default and stop making its promised payments, our nation’s credit rating would plummet. Interest rates would go through the roof, both for government debt and the credit cards, mortgages, student and car loans that are all based on the government’s borrowing rate.
Already, we spend $269 billion per year on interest payments on the debt. That is more than the departments of Education, Transportation and Homeland Security combined.
If we defaulted, it would be much more difficult and costly to raise new cash. The government would have to spend much more than the current 7 percent of its budget servicing its debt.
Services would fall, taxes would go up, and the standard of living would collapse in the United States. It would make the Great Recession we just climbed out of look like a pothole.
Why would we even risk debt default as a nation?
The U.S. has sterling credit — the world’s best, actually. Our currency is the world’s standard. We can raise our debt ceiling with no problem. In fact, it has been done 100 times before — an act so historically mundane it was akin to a piece of legislative housekeeping that barely garnered any attention and passed sometimes without any opposition at all.
But recently, times have changed. Some lawmakers have dangerously seen this moment as a bargaining chip — a way to force political concessions.
While the debt ceiling has sometimes been tied to budget deals to improve the country’s fiscal health, the first priority is to raise the debt ceiling with no threat of default.
As fiscal hawks and heads of the Campaign to Fix the Debt, there is perhaps no one more interested in a responsible bottom line.
The national debt is at historic levels and needs to come down. In 2022, trillion-dollar annual deficits are projected to return. By 2027, debt as a share of the economy will rise to 91 percent from 77 percent today.
It is the worst fiscal hole since World War II. But even then, the debt was coming down after the war. Today, it is projected to rise steadily as far as the eye can see.
It is possible, however, to be a fiscal hawk and also vote to raise the debt limit.
Here is a plan that people of all political persuasions should be able to get around:
First, we need to raise the debt ceiling as soon as possible to provide certainty to the economy.
Second, we need to put our long-term debt on a downward path back toward the historical average as a share of the economy. An easy start would be reforming the budget process to make it harder for lawmakers to keep digging deeper. Right now, the budget process is broken, and oftentimes lawmakers use accounting gimmicks just to get over the next fiscal bump with no plan to address the building mountain of debt just down the road.
Third, we need a plan to address our unsustainable entitlement programs, including Social Security and Medicare. They are the largest drivers of the long-term debt and on a course toward insolvency. Without changes, Social Security alone will run out of full funding by 2034. Because the issue is so politically charged, a bipartisan commission should be created to craft a plan to shore up these programs while protecting the most vulnerable.
Finally, we need to enact tax reform that grows the economy, not just tax cuts that add to the debt.
Any politician who thinks the full faith and credit of the United States is a bargaining chip doesn’t deserve the office they hold.
Sinking the ship on purpose because you don’t like the direction it is heading is not a strategy. It is a death wish.
• Ed Rendell is a former Democratic governor of Pennsylvania. Judd Gregg is a former Republican senator from New Hampshire.