"Policymakers Can And Should Take The Easy Way Out On The Debt Limit: Just Raise The Ceiling"
As we wait for President Obama’s nine hundredth press conference about debt ceiling negotiations, it’s worth reviewing the formidable structural barriers to making a deal. The biggest stumbling block is that Republicans are uniformly opposed to increasing tax rates and nearly unanimous in their opposition to closing tax loopholes. A smaller stumbling block is that some large segment of Democrats is deeply hesitant to cut Social Security benefits. A Politico story today reminds us that House Republicans don’t want to cut military spending any more than House Democrats want to cut retirement payments. What’s more, the House Republicans are riven by intra-caucus dynamics such that John Boehner doesn’t want to agree to anything Eric Cantor hasn’t agreed to since that would open the door for Cantor to challenge him, but Cantor doesn’t want to agree to anything since that would entail giving up the chance to challenge Boehner.
Surveying the scene, perhaps everyone should take a deep breath and recall the traditional way the country has avoided default when the debt ceiling needs raising: Congress raises the debt ceiling.
It’s that simple. The same kind of “clean” debt ceiling increase that’s passed repeatedly over the past 100 years will allow the country to avoid default without tax increases, without defense cuts, and without slashing entitlement spending. Education will be spared. So will transportation, health care, farm subsidies, and everything else. The interest rates investors are charging the American government to buy our debt are extremely low right now. The world economy is suffering from an excessive demand for American debt, not by reluctance to lend. All we need to do to keep our finances flowing is to raise the statutory debt ceiling. At some point, things will change, and we may face a crisis that requires bipartisan dealmaking and “tough choices.” Right now, though, the only crisis we face is an entirely self-created one. House Republicans wanted to create a hostage situation to force President Obama to propose steep spending cuts. But when Obama came to the table with a proposal for steep cuts, it turned out that Republicans don’t actually want to sign a bipartisan deal. Which is fine. Don’t sign a deal! The absence of a deal in no way forces a crisis. Just raise the debt ceiling, fight the 2012 elections, and pick up the long-term budget issue then.
The world has plenty of problems on its plate right now. The long-term U.S. structural deficit isn’t one of them. The expiration of the Treasury Department’s borrowing authority is one. And the latter problem can be solved without addressing the former.