Because of the kind of writing that we do on Dorf on Law, we occasionally imagine that we can place an op-ed piece in one of the big-time newspapers (the ones that still exist). This is almost always a fool's errand, because the odds are ridiculously stacked against any over-the-transom submission to such places. At least, that's what I tell myself. In any event, DoL readers (and writers) are not the slaves of those dastardly editors. Enjoy!
While the Debt Ceiling Slept
When Americans woke up on
Sunday, May 19, the debt ceiling woke up, too.
Remember the debt ceiling?
Earlier this year, Republicans in Congress were again threatening to
allow the federal government to default on its obligations, by refusing to
increase the debt ceiling. When the
politics of that latest hostage-taking episode turned against them, they
temporarily suspended the ceiling.
On February 4, therefore, the
debt ceiling went into hibernation. On
May 19, it came back. What happened in
the meantime? Nothing. The country survived without a debt limit,
and we could do so forevermore.
The deal that allowed the
debt ceiling to go to sleep specified that, upon regaining consciousness, the
debt ceiling would discover that it had grown to the exact level that federal
debt had reached while it slept.
Supposedly, this maneuver allowed self-professed deficit hawks in
Congress to say that they had never voted to increase the debt ceiling. Even though that is not even technically true
– the “ayes” voted for a bill that would reset the debt ceiling to a higher
level fifteen weeks later – it was enough of a fig leaf to delay the crisis for a few
months.
When the debt ceiling went to
sleep, “total public debt outstanding” was just above $16.4 trillion. We had technically hit the limit in December
of 2012, but Treasury was in the midst of what have sadly become rather
ordinary “extraordinary operations” (asset sales, rearranging payment dates on
certain flexible obligations, and so on) to prevent a catastrophic default. Although the numbers have not yet been
finalized, the debt ceiling is now likely to be reset at roughly $16.7
trillion.
Immediately, however, this new hard
limit puts the Treasury back into emergency mode, forced to waste time and
effort moving things around while Republicans renew their threats. We are, in other words, back to our very
dysfunctional new normal.
But we can learn a few things
from our fifteen-week hiatus. We now
know that the debt does not explode when there is no debt ceiling. This might be a surprise, because when the
White House suggested back in December that Congress effectively eliminate the
debt ceiling, Senate Minority Leader Mitch McConnell mocked the idea, saying
that the President wanted to spend money “without any limit.” Well, there was no debt ceiling for more than
three months. What happened?
From February 1 (the last day
before the debt ceiling dozed off) through last Friday (the last date before
the debt ceiling woke up), gross federal debt rose from $16.434 to $16.737
trillion, an increase of 1.8%. Here are
some other time periods, for comparison:
-- During the fifteen weeks
before we reached the debt ceiling on December 31, 2012, gross federal debt
rose from $16.008 to $16.432 trillion, for an increase of 2.6%.
-- During the same period
from early February to mid-May last year, the debt rose by 2.5%.
-- During the last fifteen
weeks of George W. Bush’s presidency, the debt rose by 4.3%.
-- During the fifteen weeks
after the 2003 U.S. invasion of Iraq, the debt rose by 3.3%.
There is not much of a
pattern there, is there? One thing we
can say for sure, however, is that debt (and spending) did not go up without limit during the last fifteen
weeks, even though there was no legal debt limit. In fact, debt during the no-debt-limit era
rose more slowly than at any of those other times.
The explanation is quite
simple: The President never has the authority to spend without limit, because
it is Congress that passes appropriations laws that the President is then required
to execute. Congress limits the debt at
all times, when it passes spending and taxing bills that determine how much
money must be borrowed.
Even without being bound by a
debt ceiling law, therefore, President Obama could do no more than to spend
exactly as much as Congress ordered him to spend, to collect exactly as much in
taxes as Congress ordered him to collect, and to borrow the exact difference
between the two, as Congress ordered him to do.
The new round of
extraordinary measures is likely to take us into October, before a default
might occur. We thus face months of
posturing over the reawakened debt ceiling, with Republicans set to warn that
they will refuse to increase it, because that would supposedly open the
floodgates of spending and debt. That is
simply wrong. Without a debt ceiling,
Congress and the President must still negotiate laws with specific (and
obviously finite) spending and taxing authorizations, and thus that require
finite borrowing.
Not having a debt ceiling,
however, would at least eliminate the threat that the United States might
default on obligations to which Congress has already committed us. There is no downside to eliminating the debt
ceiling, and as a bonus, it would give Republicans one less dangerous tool with
which to threaten the President (and, by the way, the global economy). But, of course, that seems to have been their
whole point all along.
