This appeared in the Knoxville News-Sentinel March 6, 2011
Congress Must Mind Debt Ceiling
We have been witnesses to our government behaving badly.
First, there has been the threat of a government "shutdown" that is not really a shutdown. Then there is the haggling over this year's budget with $4 billion in spending cuts for two weeks and a $61 billion cut for the rest of the fiscal year.
Even my students who struggle with math can figure that with a federal budget of $3.8 trillion, our Congress is debating rounding errors. We all grow tired of hearing that seemingly all government spending is somehow essential. Then comes the report from the Government Accountability Office that the federal government is replete with duplicative programs (as if we didn't know this already) wasting at least $200 billion.
At a minimum, members of Congress should propose eliminating all duplicative programs. Then the real job should begin. I think that a modest proposal should be to not raise the debt ceiling. Currently the ceiling is set at $14.294 trillion and government spending has pushed the debt to only around $150 billion less than the cap.
Estimates are that government borrowing will hit the ceiling around April 15 - the irony of it all. What Congress always has done in the past is to raise the ceiling and has done so at least 77 times just so it can keep spending. The "ceiling" was intended to limit government spending by limiting the amount it could borrow.
Allowing the ceiling to rise is fiscal irresponsibility. Of course, there are those who always want to spend more and who forecast doom and gloom. Two of the administration's spokesmen, Treasury Secretary Timothy Geithner and chief economist Austan Goolsbee, have warned that a failure to raise the ceiling would precipitate an economic crisis with catastrophic effects on the economy. However, I have found few statements by either that are trustworthy.
No crisis would occur. The United States would not default on its obligations. April 15 reminds us that the government still will be receiving monies that can be used to pay on the existing debt. U.S. Sen. Pat Toomey, R-Pa., recognizes this and has introduced legislation to that effect. What not raising the ceiling actually means is that the Treasury could no longer borrow additional funds to cover expenditures appropriated by Congress.
Unlike American households who have a budget constraint, despite the debt ceiling Congress does not.
Congress was aware of the ceiling when it appropriated the expenditures in the first place and knew it would broach the limit. Yet it did it anyway knowing that the ceiling is symbolic and not real. Well, it is time we made it real. We have to get our fiscal house in order and the first step is letting the debt ceiling be the budget constraint for Congress. Just say no.
Dr. Harold Black is the James F. Smith Jr. Professor of Finance at the University of Tennessee. He may be reached at firstname.lastname@example.org.
© 2011, Knoxville News Sentinel Co.
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