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Dodging the Debt Limit Stampede
Posted By Ernest Istook On December 8, 2010 @ 3:00 pm In Entitlements, Taxes & Spending,Ongoing Priorities | 3 Comments
Brand-new Congressmen don’t take office until January, but they’re already consumed with worry about the national debt. They’ll be faced with a vote expected next year to raise the debt ceiling beyond its current $14.3-trillion (about $47,000 apiece for everyone in America).
The current $14.3-trillion debt ceiling has almost doubled since May 27, 2003, when it was set at $7.4-trillion. Projections show we’ll reach our credit limit around May of 2011, pushed along by three straight years of trillion-dollar deficits, including an expected $1.5-trillion this year.
Congress should not feel rushed into voting on a higher debt ceiling, although some will try to create pressure with claims that anything else would be irresponsible.
Although House Speaker-Elect John Boehner has asked that freshmen handle the issue “as adults,” many of them are adamantly against new borrowing to pay for the profligate spending that they campaigned against.
“I am against increasing the debt ceiling,” said Rep.-elect David Rivera (R-FL) during freshman orientation. “It is going to be very, very difficult, I would say next to impossible to change my position.” Similar comments came  from Sen.-elect Mike Lee (R-UT) and Reps.-elect Jeff Denhem (R-CA), Tim Scott (R-SC) and Bill Johnson (R-OH)—among many others. “I’m going to vote against raising the national debt ceiling. We simply can’t continue to mortgage the future or our unborn children and grandchildren,” Lee said.
Backrooms are already abuzz about what trade-offs might justify a debt increase. History suggests that there is ample time for political maneuvering, so nobody should be stampeded into a bad decision.
In 1995-96, President Bill Clinton and the fresh Republican majority in Congress were deadlocked over spending levels, so a creative Treasury Department juggled funds to spend another $139-billion that kept government going even after reaching the debt limit . By comparison, the annual deficit that year was $107-billion.
The Treasury officially declared a “debt issuance suspension period” on November 15, 1995, which lasted until March 29, 1996, when Congress agreed to lift the ceiling to a then-record $5.5-trillion. We went 134 days past the deadline.
Although the House approved legislation to block the Clinton Administration from dipping into trust funds to pay government’s bills , the Senate did not. So Treasury did just that, borrowing against federal trust funds such as Civil Service pensions, and later re-paid the money once the ceiling was raised. There was no default on debt, and no missed payments to creditors, contractors or federal workers. Nobody missed a Social Security check because Congress approved two weeks’ worth of temporary borrowing ($29-billion) in late March of 1996 solely for Social Security, without counting it against the debt limit.
The technical details of how Treasury juggled the books are recounted in the General Accounting Office’s report GAO/AIMD-96-130 , “Debt Ceiling: Analysis of Actions During the 1995-1996 Crisis.”
That stand-off ended with a compromise unrelated to spending levels. The GOP got earnings limits lifted for Social Security retirees and many regulations lifted from small businesses. Plus a line-item veto plan that the courts soon voided.
That government stayed afloat for an extra 134 days in 1996 indicates ample time will be available to seek an accord in 2011. Would a higher debt ceiling be justified if discretionary spending were cut across-the-board? If entitlements were reformed to lower the cost to government? If Obamacare were repealed? If spending caps were created—and could actually be enforced? Or for some other trade-off? Or not at all?
What is clear is that the debt ceiling should not be raised without major changes in the way Washington does business. Not “promises” of change, but real change. Effective immediately, not at some future date.
Yet the politics are that those who ring up the bills—such as the outgoing Democrat majority—tend to vote against debt ceiling hikes once they are in the minority. In fact, most in the minority tend to vote no, regardless of party.
So before Republicans talk about more borrowing, they should try sending an invoice to President Obama, Speaker Pelosi and Majority Leader Reid, asking them to cough up payment for their record spending spree. Shouldn’t those who spent the money be asked to pay the bill?
Article printed from The Foundry: Conservative Policy News Blog from The Heritage Foundation: http://blog.heritage.org
URL to article: http://blog.heritage.org/2010/12/08/dodging-the-debt-limit-stampede/
URLs in this post:
 Similar comments came: http://thinkprogress.org/2010/11/22/freshmen-betrayal/
 debt limit: http://www.heritage.org/federalbudget/increases-us-debt-limit
 the House approved legislation to block the Clinton Administration from dipping into trust funds to pay government’s bills: http://thomas.loc.gov/cgi-bin/query/D?c104:3:./temp/%7Ec104ULS0HL::
 GAO/AIMD-96-130: http://www.gao.gov/archive/1996/ai96130.pdf
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