Raise the debt ceiling, but cut spending, too

What will happen with the debt ceiling is the most significant political story of the last few months. President Joe Biden demands that Republicans acquiesce to a “clean” debt limit increase. At the same time, Republicans seek lower spending to address the worsening national debt.

We should do both.

The debt limit must be raised, and we should not jeopardize the full faith and credit of the United States by playing unnecessary games. But the president’s view that we’ve never used such moments to reorient the federal budget is inconsistent with history.

Debt ceiling fights aren’t new, nor are budget deals in their aftermath. In fact, every single major deal from the last four decades has come out of a fight over the ceiling, including the Budget Control Act spending caps after 2011’s “fiscal cliff,” the agreement in 1997 between former President Bill Clinton and the Republican-controlled Congress, and the Gramm-Rudman deal in 1985.

And the country’s current path looks worse than any of those times. The Congressional Budget Office’s latest budget outlook now predicts a deficit of more than $1.5 trillion in 2023, which could be even higher. The CBO also estimates that the United States’ public debt-to-GDP ratio — the best measure of the country’s debt burden — will be nearly 120% in just 10 years, more than exceeding the World War II highs. With one of Medicare’s trust funds forecast to be bankrupt as soon as 2028, our fiscal situation is growing dire on multiple fronts.

It’s a far cry from where we were at the turn of the century. In 2000, before the pandemic, the 2008 financial crisis and multiple wars in the Middle East, the CBO expected surpluses as far as the eye could see. But no longer.

The debt limit isn’t anyone’s idea of an excellent way to run a nation’s finances. We should replace it with a fiscal rule like those used in developed countries and some U.S. states. These rules limit spending based on expected tax revenue while allowing borrowing when necessary. The evidence is strong that they would promote responsible fiscal outcomes without creating the dire situations that have become common with the U.S. debt limit.

After all, the debt limit wasn’t meant to be used this way. The ceiling was created during World War I as a way for the Treasury Department to issue debt without congressional permission. In other words, its goal was to allow for more debt, but today it is ironically one of the few checks we have on government spending run amok.

But the debt limit is the system we have, and both parties should use it to our advantage and right our fiscal ship. Because it’s long become clear that we must address the spending problem at the core of the national debt.

Over the last three years, Presidents Biden and Donald Trump spent at a record pace and accelerated the national debt. The $5 trillion in response to the COVID-19 pandemic blew up the federal budget, and that says nothing of all the other spending that also increased or otherwise is on autopilot.

For this reason, Speaker Kevin McCarthy and House Republicans should be applauded for how quickly they — together with persistent inflation — have changed public discussion on this topic.

It didn’t look like it was going to be this way. McCarthy has a long record of supporting big-spending legislation, and Republicans didn’t exactly look like they had an interest in being fiscal warriors during the last Congress.

But McCarthy’s contentious speaker fight seems to have empowered him and engaged more Republicans in the party’s decision-making process. Surprisingly, McCarthy succeeded in getting his party to coalesce behind the “Limit, Save, Grow Act,” throwing the ball back into Biden’s court. And Biden has since changed his tune. After meeting with McCarthy and other congressional leaders, Biden told an audience in New York that “we should be cutting spending.”

It’s a far cry from the tune the president was singing just a few weeks earlier, and all Americans should be enthused and relieved. Let’s hope negotiations continue so that both parties can do what’s right for the country for once.