Debt ceiling incompatible with government spending

A few weeks ago, Secretary of the Treasury Janet Yellen announced that unless Congress takes action, the U.S. government will run out of cash in less than two months.

Alarming as it sounds, her statement didn’t exactly trigger the panic that would be expected of an announcement of this magnitude, because this is hardly the first time this has happened.

Lately, the U.S. has been dangerously short on cash almost every year because of a uniquely American concept called the debt ceiling, which places an upper limit on the amount of debt the country can take on. Though it’s meant to be a reminder for politicians to check the level of national debt, it results in a ridiculous spectacle with terrifyingly large consequences.

Though a debt ceiling is not inherently a bad idea, it is fundamentally incompatible with the way U.S. government spending works. The U.S. Congress almost always allocates more spending than revenue, causing the government to run a deficit. The president therefore has no alternative but to borrow money to fulfill the budget and raise the national debt.

Only in the U.S. is the necessary borrowing to fulfill the budget not implicitly approved by the legislature. That’s why a Congress controlled by the opposite party than that of the executive can always act “shocked” that “the president’s irresponsible spending has brought the country so close to the debt ceiling once again.”

Of course, both Republican and Democrat-controlled sessions of Congress always fail to mention the elephant in the room — that the president has no actual control over the allocation of money in the budget.

The only solution is for both houses of Congress to agree to raise the debt ceiling, which would subsequently allow the government to borrow more funds.

Though Republicans have been quick to accuse President Joe Biden of excessive spending, the act of raising the debt ceiling isn’t a partisan issue.

Tthe debt ceiling has been raised 78 times, under both Democratic and Republican administrations.

If the debt ceiling isn’t raised, the government is barred from borrowing more money to cover debts already incurred. The U.S. would likely enter sovereign default, meaning the government is no longer able to pay off its debt.

This would be the absolute worst-case scenario, as trust in the U.S. economy would collapse overnight, likely plunging the whole world into a recession with destabilized financial markets.

Sovereign defaults are rare, but have happened more than a few times. The most notable recent examples are Argentina in 2014 and 2020, and Greece in 2015. The consequences for both nations have been grave. Argentina is currently experiencing an annual inflation rate of over 100%, and the Greece regularly reports high unemployment and poor economic growth.

But for a Congress controlled by the opposition, there’s no better leverage than the entire economy to negotiate demands. However, even lengthy debates have consequences. For example, in 2011, the debt ceiling was raised only 2 days before a default was projected to occur following a tense months-long standoff between President Barack Obama, a Democrat, and the Republican-controlled Congress. This near-disaster caused the S&P Index to downgrade the country’s credit rating for the first time, costing American taxpayers more than $1.3 billion.

However, I am more concerned this time compared to 2011 because House Speaker Kevin McCarthy’s power has been significantly curbed due to key concessions made during the 15-round long election for Speaker of the House earlier this year.

The Republican delegation as a whole is more radical now than in 2011, and it remains to be seen how negotiations will play out.

Although government spending cannot be reckless, the debt ceiling in practice is the much bigger problem. And unfortunately, abolishing it appears impossible in the short term. Congress loves it because it creates a problem that can be blamed on the president. Not only that, but only Congress can supply a solution.

If nothing else, this impending debt crisis is all the more proof that the debt ceiling must be abolished. Only then can the act of paying off this country’s debt be separated from political squabbling. The U.S. has not missed a single debt payment in its 246 years of independence, and let’s hope this record doesn’t end here.

Leave a Comment
Donate to The Campanile
Our Goal

Your donation will support the student journalists of Palo Alto High School's newspaper

More to Discover
Donate to The Campanile
Our Goal

Comments (0)

All The Campanile Picks Reader Picks Sort: Newest

Your email address will not be published. Required fields are marked *