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  • Debt Ceiling, the Sequel: Coming to a Theater Near You

    Remember last year’s titanic struggle over increasing the debt ceiling? A mighty contest that threatened to leave the nation in default, lasted for much of the year, and resulted in a $2.1 trillion increase in the national debt—papered over in part by the cover of the not-so-super committee? Well, this movie has a sequel: Debt Limit II, a return engagement scheduled to open on Election Day, November 6, 2012.

    Of course, the election will be in large part about President Obama’s dreadful handling of the economy, which is finally showing real signs of life despite—not because of—Obama’s policies. And the election will also be about America’s future, a future that is not as bright as it should be because the national debt will have risen by more than $5 trillion over the course of Obama’s term. But this only partly explains the timing of the sequel’s release.

    The sequel is scheduled to open on or about Election Day because that, in fact, is when the federal government is likely to once again hit the debt ceiling with a loud clang.

    Recall that when the cynically named Budget Control Act enacted last August raised the debt ceiling by $2.1 trillion, the figure was not chosen at random. It was chosen carefully (if poorly) to carry the government through 2012. Neither the Republicans nor the Democrats in Congress nor the President wanted another debt ceiling vote until safely after the election. Ah, the best laid plans.…

    What happened? First, the deficit forecast for 2012 ballooned. The Administration’s official analysis last September projected a 2012 deficit of $956 billion. Imagine: Getting the deficit below a trillion dollars is now considered good news.

    According to the latest Congressional Budget Office (CBO) analysis under its more realistic “Alternative Fiscal Scenario,” the 2012 deficit is projected to be $1.111 trillion. And that was before Congress passed legislation extending the payroll tax holiday, among other things, which according to CBO in 2012 will reduce revenues by about $95 billion and raise spending by about $20 billion—exclusive of the Medicare “doc fix” provisions already assumed in the Alternative Fiscal Scenario. On balance, this leaves a projection for the 2012 deficit of roughly $270 billion more than the White House projected last summer.

    Given the current level of debt, this deficit forecast, and the normal monthly pattern of federal receipts and outlays, the implication is that rather than hitting the debt limit sometime in early 2013, as expected when the Budget Control Act was signed, the federal government is likely to max out its credit card on or about Election Day, which should make for an especially entertaining spectacle.

    Posted in Economics [slideshow_deploy]

    7 Responses to Debt Ceiling, the Sequel: Coming to a Theater Near You

    1. Stirling says:

      Will the IRS accept my "Monopoly Money" as payment next year? I would bet that they don't know the difference bettween real and paper money at this point. Somebody ask parker bros to make a new IRS monopoly game with Uncle Ben's printing press.. lol

    2. JohnPatriot says:

      FACT CHECK–Bush43 had the dreadful handling of the economy! WHY?

      SUPPLY-SIDE ECONOMICS… Overcoming this evil is the key to making America whole and good again!
      Supply-side economics is the PIVOTAL ISSUE of this election…

      Supply-side economics — first popularized by Ronald Reagan — was also called Voo-doo economics by George Bush41, and is now often known as trickle-down economics. It is nothing new; the people of the Middle Ages were very familiar with supply-side economics; there it was feudalism. Unfortunately, supply-side economics has put us on the road/descent back to feudalism. It is a complete fraud!

      Think of our future as an economic choice between supply-side economics and demand-side economics. Demand-side economics is what made America great! Demand for product and services came from a large, economically healthy, and growing middle class, and that demand created jobs and economic well-being. Almost everyday the business channel CNBC reports that the consumer is 70% of the US economy. This simple, straightforward fact and truth is proof of our demand-side economy.

      To be continued…

    3. Monopoly Money might worth more than the Dollar in a few years. I would start hording it! ;)

    4. JohnPatriot says:

      continuing…

      But George Bush43 devastated consumer demand and the great middle class with 8 years of supply-side economics and tax giveaways to the top 1% that now have 40% of America’s wealth. Today, the middle class is still mostly flat on its back and unable to spend and create the necessary demand for all types of goods and services. Further confirming the need for demand, US corporations now have a record $2 trillion in supply-side cash, but they are still NOT hiring because they see no demand growth for their products and services. No corporation (one exception: Apple) creates jobs without first seeing demand. DEMAND = JOBS!

      America became great because of its bottom-up economy, NOT top-down or trickle down. The richest Americans can’t grow jobs and our economy by trickling money on us. Bush43’s years of economic stagnation proved that! With the worst job creation record of any President in the last 70 years, Bush43 added only 3.7 million net new jobs over 8 years. In contrast, Clinton added 22.7 million jobs.

      Can we ever overcome the craziness of this Republican mythology? As George Santayana put it, "Those who cannot remember the past are condemned to repeat it!”

      • guy rochford says:

        Throw in a Santayana quote if it makes you feel literate but to most of us reading this, you and your type are "one trick ponies". You have some valid points and we should learn from them. However, you (seemingly) can not stop yourself from the self indulgent orgy of Bush hatred which renders your entire argument invisible. You also appear to be terminally envious of achievement as you lay the blame for the plight of the middle class solely at the feet of the 1%. Again, you would find agreement that there are inequities in the tax code and other legislation that need to be brought down to earth but these did not occur solely in the W Bush administration. If you believe the "Bush Tax Cuts" were responsible for transferring vast wealth to the 1%, you must submit to the math. 897 Billion over eight years is the value of the Bush plague. If you revoked that from everyone who benefitted (the middle class included), you would have enough to cover 75% of THIS YEAR'S deficit. If you want to make this country better for the middle class, stop accepting the easy answers and false mythology of the Democrat party. Look deeper.

    5. 95 billion shortfall of revenue/money coming in that adds to the deficit with a 20 billion dollar increase to spending that adds to the debt that keeps piling on to the total debt that at this point is near *16* trillion that is *T *for trillion which indeed will bankrupt us if not drastically reduced!

    6. Bobbie says:

      Instead of focusing on jobs created under presidents of the past how about comparing job losses because of and where we would be today if not because of…

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