The Real Issue in Government Shutdowns
Before “Cryin’ Chuck” Schumer caved, the most recent skirmish over the federal government shutting down was about an issue that is entirely unrelated to keeping it open. But that’s usually the case. In 2013, the shutdown was about ObamaCare funding, this year it was all about the so-called DACA “Dreamers” and their desire to obtain legal status, which is even more unrelated. One wonders how many Americans know what Congress has always done to avoid or to end a shutdown. What Congress has done each time to end these spats is: raise the “debt ceiling,” also called the “debt limit.”
In past shutdown debates, some have raised the possibility of “default” if Congress were to not raise the debt limit. The webpage for Debt Limit at Treasury is mainly a bunch of links to government documents going back seven years, but it does have three short paragraphs of text, including this one:
Failing to increase the debt limit would have catastrophic economic consequences. It would cause the government to default on its legal obligations -- an unprecedented event in American history. That would precipitate another financial crisis and threaten the jobs and savings of everyday Americans -- putting the United States right back in a deep economic hole, just as the country is recovering from the recent recession [italics added].
That’s loose talk, don’t buy it, Congress has shut down the government several times and the republic still stands. On Dec. 20, Forbes ran “10 Things You Need To Know About The Debt Ceiling And Potential Government Shutdown” by Jeffrey Dorfman, and item #3 on his list is: “Not raising the debt ceiling does not mean a default or not paying our debts.”
Default is when you can’t meet your “legal obligations,” such as paying the interest on U.S. debt, and paying government contractors and suppliers. What default would not be is an inability to pay for government programs that are not contractual. Yet, the Treasury’s webpage treats spending the same:
The debt limit is the total amount of money that the United States government is authorized to borrow to meet its existing legal obligations, including Social Security and Medicare benefits, military salaries, interest on the national debt, tax refunds, and other payments [italics added].
Treasury doesn’t seem to know what a “legal obligation” is. If Boeing delivers a fleet of fighter jets to the military, there’s a legal obligation to pay Boeing. Not paying Boeing would signal default. Paying interest on the debt is also a legal obligation. But paying Social Security benefits isn’t a legal obligation. In fact, Congress could end Social Security today and there’s nothing that SS recipients could do about it, because it’s not a contractual obligation. Yet the Treasury webpage lumps all expenditures together.
On Jan. 22, Bloomberg ran “Get Rid of U.S. Government Shutdowns Forever” by Ramesh Ponnuru. The short article outlines a 2013 bill introduced by Sen. Rob Portman which is designed to avert shutdowns. It involves 1 percent cuts in spending when appropriations haven’t been passed. Portman’s bill was appropriately titled the End Government Shutdowns Act.
Also on the 22nd, Mother Jones ran a response to Ponnuru: “Ban Government Shutdowns? Maybe We Actually Need More of Them” by Kevin Drum, who writes: “If the government were put on automatic autopilot in the absence of a budget agreement, the incentive to pass a budget would shrivel even further than it already has.” Mr. Drum compares Ponnuru’s idea with the changes made to the filibuster half a century ago. His counterproposal to Ponnuru’s is worth considering; you might read it (despite it being at Mother Jones.)
What’s fairly certain is that neither Ponnuru’s nor Drum’s solutions will be in place in time for the next shutdown showdown on Feb. 8, (which was scheduled by the continuing appropriation H.R.195 on Jan. 22). And, if there’s again wrangling about the Dreamers or any other issue unrelated to the debt limit, then you’ll be witnessing government at its most cynical. The minority will be holding America “hostage” unless the majority gives them their “ransom.”
Congress could agree to never again use the debt limit to “take hostages,” and agree to raise the debt limit every time they bump up against it. But if Congress keeps borrowing money, they’re liable to bump up against something almost as horrific as default, and that’s high interest rates.
With soaring interest rates comes soaring inflation, and with soaring inflation comes a debased currency. And when a currency has been debased, debauched, and degraded, who wants to buy sovereign debt denominated in that currency? (Are you in the market for some nice Venezuelan bonds?) Inasmuch as interest on the debt is an item in the federal budget, it would seem that it must be paid for with tax receipts, not money created by the Federal Reserve. If so, then high interest rates crowd out other spending.
In 2010, former Chairman of the Joint Chiefs of Staff Adm. Michael Mullen said: “The most significant threat to our national security is our debt.” It’s easy to think that all the brouhaha about government shutdowns is a ruse, a way to divert the public’s attention away from the real issue: the fact that every time they hit the debt ceiling, Congress invariably raises it, and gives itself permission to take America ever deeper into debt.
But there’d be no need to raise the debt limit if Congress were running a balanced budget. The Treasury webpage, however, seems to be assuming that Congress will never again balance the budget. Balancing the budget could perhaps be easier than we think; read on:
In 2016, total federal revenue was $3.267T, an all-time high (see Table 1.1). The latest year for which that revenue would have been enough to cover all federal spending was 2008, when total spending was $2.982T. And in 2009, the year with still the biggest deficit ever (-$1.412T), 2016’s revenue would have been just $250B short of covering all of 2009’s massive spending: $3.517T.
Despite that, Congress just can’t bring itself to make the spending cuts that would balance the budget and keep us Americans from going further into debt. Yet all the media can talk about is the Dreamers. But hey, we’re all “dreamers.” And some of us dream of a balanced budget and an end to debt. Dream on.
Jon N. Hall of Ultracon Opinion is a programmer/analyst from Kansas City.