The month of October is soon here. For those of us who live with four seasons, this means chilly fall winds, leaves changing colors and taking inventory of snow shovels and winter boots.
For Congress, October means a lot more. Is it the start of another fiscal year, but this time it is not just any fiscal year. It will be the first in history where the federal government spends more than $4 trillion.
As if to enhance the fiscal fireworks, Congress will have to start the new fiscal year with a vote on the debt ceiling. Those in favor of allowing more debt apparently do not believe that the statutory debt limit of $18.1 trillion is not generous enough.
The problem with the fiscal conversation in Washington is that it runs on two parallel tracks: one about the budget and one about the debt ceiling. The budget conversation seems to be dominated by Democrats proposing more spending. On August 18, Roll Call quoted a letter sent by Democrats to Senate majority leader Mitch McConnell (R-KY):
“Inaction and failure to responsibly restore sequester-level cuts in [Fiscal Year 2016] appropriations bills will have real consequences for our country. That is why we are eager to start working as soon as possible to negotiate a compromise that will keep our nation and economy strong, and keep the government open.”
While Democrats insist on more spending, Republicans are fighting among themselves over the debt ceiling. Senator Ted Cruz (R-TX) is the most vocal opponent to raising the ceiling. He has on numerous occasions expressed his resistance to allowing more debt, even to the point where he could provoke a shutdown of the federal government.
As Republicans get bogged down in the debt-ceiling issue, struggling to handle Cruz and the threat of a shutdown, the Democratic focus on more spending makes them look detached from the overarching problem: the runaway debt. Both parties have fragmentized the debate over what should really be one, big issue, namely how we stop paying for today’s federal government with tomorrow’s tax revenues.
In short: Republicans and Democrats both need to raise the conversation to the 30,000-foot level, connect the dots of spending with the dots of debt and draw the right conclusions.
On the one hand, more spending inevitably means higher taxes or more borrowing. Who should pay those higher taxes, and what are the macroeconomic consequences of raising taxes? If Democrats do not want higher taxes today, then how much do they think our children and grandchildren should pay in higher taxes for the deficits we run up here and now?
On the other hand, Republicans need a consistent policy on the debt ceiling. You cannot just continue to raise it whenever Uncle Sam has maxed out the latest increase in his credit line. At some point the United States will face a debt crisis of a magnitude comparable to what others have suffered. You don’t need to go to Greece, Puerto Rico, Spain or Italy during the Great Recession – you can go back to Denmark in the 1980s or Sweden in the ‘90s. There, debt crises led to enormous suffering among people dependent on government health care, welfare, unemployment benefits and retirement checks.
It is time for a bipartisan conversation about the debt. It is time for Democrats and Republicans to grow up and humbly realize that they have all unintentionally, but irresponsibly contributed to a problem that is now threatening the very future of this country.
It is time for new solutions to our debt problem. Here are two quick points for our elected officials to consider:
- A debt-capping balanced budget amendment would put a firm end on the government’s credit line. But since it caps debt and not deficits it allows Congress to responsibly use deficits in recessions, provided there are surpluses in good times to keep the debt steady over a business cycle.
- When resources are finite we all have to prioritize. Well-intended yet fiscally misguided members of Congress have, in the past, created so many entitlement programs for so many Americans that the private sector simply cannot pay for them all. It is time for Democrats and Republicans to separate essential from non-essential spending programs.
A conversation along the lines of these two reform ideas would help Congress re-establish fiscal sustainability as the foundation for its budgets. Bipartisanship would guarantee long-term stability with low interest rates, reasonable taxes and no chronic deficits.
But this conversation needs to start right now. Or, at the latest, in October. If not, it will soon be too late. And to late will be sooner than we would like to.
Sven Larson, Ph.D., is an economist and Member of the Council of Scholars of Compact for America. He is the author of Industrial Poverty (Gower Publishing), about the debt crisis in Europe.