Yes, it’s time to talk about the debt limit again.
Every time the U.S. bumps up against its debt ceiling, we start the cycle all over again. President Obama insists he won’t negotiate over the debt ceiling, but of course he will. Members of Congress grandstand about changing this vicious cycle, and then most clamber for the easy way out so they can return to matters they’d rather talk about, which is just about anything but cutting spending.
Meanwhile, federal spending continues its out-of-control expansion, and the debt clock keeps ticking.
We will hit the debt limit again on May 19. Treasury is expected to exhaust its cash management tools sometime in September or October. In the meantime, Washington’s periodic debt ceiling ritual will play out. Whatever happens, the debt limit should not be raised unless we are put on a path to balance the budget in 10 years. That’s the bottom line.
Debt ceiling fights are always about leverage—Members of Congress want to use the vote to extract concessions from the other side, usually the President. For example, tax reform is a much-needed pursuit, but it’s not the answer to the debt limit. Tax reform, done well, should strengthen the economy and produce more revenue, but it obviously cannot cut spending—and excessive spending is the near-term and the long-term problem.
Heritage’s J.D. Foster, the Norman B. Ture Senior Fellow in the Economics of Fiscal Policy, says that tax reform needs to proceed on a separate track. When it comes to the debt limit, Congress needs to stay focused on its responsibility of budgeting:
The House of Representatives, in passing the Ryan budget, memorialized its commitment to balancing the budget within 10 years. Simple as it sounds, achieving that consensus was a major accomplishment, and achieving the result will be a major undertaking. The debt limit debate provides the next venue for taking concrete steps to reduce spending consistent with the commitment.
Recent news on the recovering economy is welcome, but the editorial board of USA Today is right on the money:
Should we chill the champagne? Should we take our cues from liberals who say it’s time to stop worrying about debt and focus on job creation and investment? Should we conclude that, even as President Obama and Congress careen from crisis to crisis, they are solving America’s fiscal problems?
The answer is: none of the above.
Why? Because “Congress and the White House have yet to address the core problem fueling long-term deficits: the automatic and runaway spending on health care and retirement benefits.”
Exactly. Reforming entitlements and cutting spending—while funding America’s vital defense needs—should be top priorities. The debt limit is an imperfect vehicle, but right now it appears the best we have for making progress on spending reductions and deficit-reducing entitlement reforms.