The debt ceiling fight is peak Washington.
It’s foolish. Political grandstanding. Inane babble.
To understand why, start at the beginning. It’s a very good place to start.
The Framers split legislative power between the two houses of Congress. The power to “raise revenue” — in other words, taxes — was required to originate in the House of Representatives. The lower house, with proportional representation and two-year terms, was intended to be closer to the people.
Their generation had recently won a war started, in part, on the evil of “taxation without representation.” Makes sense.
Compare that history to today. After the Revolution, Congress believed retiring America’s debts was of paramount importance. Our modern leaders have not let debts and deficits seriously trouble their minds for a long time.
The “Tax Cuts and Jobs Act of 2017” — also known as the Trump tax cuts — were projected to increase the national debt over 10 years by $1.89 trillion. Democrats excoriated Republicans for it.
Fair enough. But if those tax cuts had never occurred, the debt was still projected to increase nearly $10 trillion over the same period.
Then COVID hit. Congress and the Trump administration went on a spending spree. “Helicopter money” was thrown out the window to businesses, families, individuals, states and pretty much everyone.
In 16 months, our debt increased $4.8 trillion. Or half of the 10-year “baseline” estimate before the Trump tax cuts. Or two-and-a-half times the estimate of the Trump tax cuts.
Republicans and Democrats alike were part of this effort. Which makes silly wrangling over the debt ceiling little more than a political game.
If you are in Congress and you voted in favor of this spending, you have an obligation to make good on it. Period.
If a citizen, business, or anything else spends a bunch of money, it is incumbent on them to pay for it. Washington isn’t special.
Yet politicians’ incentives don’t align with financial reality. It is really fun to spend a bunch of money, loudly proclaiming all the good it will do. And if the charges are made on credit, you don’t need to worry about how to pay for it. That is a problem for after the next election. Which you’ll win, because you spent a bunch of money and basked in all the good it would do.
But the bill eventually comes due.
We’re at that point. Washington — both parties — have goosed up the national debt. Their already-authorized spending is going to push us past the credit limit. So they need to authorize more borrowing.
Yet, after that, it is time to take a sober look at our fiscal picture. Spending continues to outpace revenues. The average as-is annual projected deficit through 2031 is just shy of $700 billion per year.
If you repeal the Trump tax cuts, you can maybe recoup $150 billion per year. That is some of what Democrats are proposing. So if you pass all the Democrats’ proposed tax changes, you can capture around $150 billion per year.
So to get to zero deficit — to stop digging our debt hole — we would need to cut around $550 billion in spending or further increase taxes. We’re paying that $550 billion in interest annually through 2031.
It’s a mess.
Yet, as we move towards a post-pandemic world — into an endemic one — hopefully Congress can find inspiration in our past. After our first war racked up massive debts, leaders emerged who sought to pay them off. Even if it was politically fraught.
It was a peak of George Washington’s administration. Maybe we can do it again.