Raise the debt limit while starting to fix the budget
Congress has raised or suspended the debt limit dozens of times. Soon it will again. The debt limit may be ineffective as for restraining debt and spending directly, although it can help Congress build better tools.
Congress must increase the debt limit to avoid an immediate crisis, but it has been and can again be used to head off a longer-term debt crisis.
Let’s be clear. The recurring need to increase the debt limit is only a symptom of a coming crisis. Yes, Congress must treat the symptom now to prevent immediate financial sector turmoil. But until they cure the underlying illness, this aggravating symptom will keep gnawing at us.
Recurring confrontations over the debt limit reflect Congress’ refusal to budget rationally and its insistence on spending irresponsibly.
The looming debt limit increase should help Congress address the growth of the debt — which now exceeds the country’s economic output — with reforms to improve the federal government’s fiscal health.
The approaches now being floated by some legislators are band-aids, not structural fixes.
An increase in or suspension of the debt limit could be attached to the partisan budget reconciliation bill being patched together on Capitol Hill. Yet the budget resolution does not include that instruction, and House Speaker Nancy Pelosi (D-Calif.) said it won’t be part of House consideration. A final reconciliation package may not be able to pass before the deadline for a debt limit increase anyway.
The more likely scenario is addressing the debt limit with a continuing resolution (CR) to keep the government funded in the new fiscal year starting on Oct. 1. This could run into opposition from Republicans who have said they will not support an isolated increase.
Whatever happens next, several reforms can help break the endless loop of brinkmanship by improving federal fiscal practices.
Under today’s narrow one-party control, any plausible budget reforms need to already have broad bipartisan support.
One idea is the TRUST Act, which would create separate bipartisan, bicameral commissions to seek solvency for endangered trust fund programs such as Social Security, Medicare, and the Highway Trust Fund. On a proxy vote for the February budget resolution’s vote-a-rama, Sens. Mitt Romney (R-Utah) and Angus King (I-Maine) persuaded 71 of their colleagues to support addressing these programs’ imbalances. Strengthening them would give certainty and predictability to beneficiaries and taxpayers, and it would also help with the federal government’s overall picture.
Another option is automatic continuing resolutions to prevent government shutdowns. The shutdown that spanned the 115th and 116th Congresses generated unprecedented bipartisan support for ending the bizarre — and accidental — practice of shutdowns, which is bad for national security and much more. A bipartisan coalition of senators recently introduced a serious auto CR proposal with additional incentives to complete the appropriations process.
These reforms are important and ready for the current moment, but more are needed. We need additional changes both to policies and to the budget and appropriations process.
One promising approach is for Congress to use unified budgeting, like many states do. Including all spending and all revenue in a single bill each year would facilitate tradeoffs and increase member engagement with the overall results as well as the individual elements.
Establishing reasonable budget goals is another smart solution. Moving toward structural primary balance — balance over the business cycle, excluding interest costs — would stabilize and start to reduce the debt-to-GDP ratio, the most widely accepted measure of a government’s debt burden and sustainability.
Unified budgets and fiscal targets are not yet ready for action, however. Members of Congress and staff must develop them and other initiatives now so they’ll be ready when the next opportunity arises.
In the meantime, the debt limit needs to be raised (or suspended, though a dollar-amount increase is best). Debt limit action should include steps toward a better fiscal future. Attempts to gut the debt limit without swapping in better budget controls are unacceptable.
Congress must take every chance to repair the budget. It should include what it can now while getting ready for next time. It would be a shame for Congress to avoid today’s crisis without heading off tomorrow’s.
Kurt Couchman is senior fellow for fiscal policy at Americans for Prosperity.