If Republicans win a House majority in the upcoming election, Democrats must prioritize eliminating or suspending the debt limit during the lame duck session. House minority leader, Kevin McCarthy, has indicated that Republicans will refuse to raise the debt limit when it becomes necessary (sometime next year) unless President Biden and the Democrats agree to spending cuts possibly including changes to Medicare and Social Security. Republicans are able to pull irresponsible stunts around the debt limit because most people don’t understand what it is.
The debt limit (or debt ceiling as it is sometimes called) is a cap on how much money the US can borrow to pay for expenditures authorized by legislation. Because the US’s budget deficit is a scary big number ($1.4 trillion in fiscal year 2022), almost everyone agrees that spending should be reduced to bring things in line with how most people understand budgets. In fact, raising the debt limit has no direct effect on spending. It is simply a way to ensure that the US can meet its — already incurred — obligations.
The debt limit was first established when the US began its involvement in World War I. The House basically delegated some of its spending power to the President to give him some flexibility in carrying out the war effort. The “debt limit” was established to ensure that the House could carry out some reckoning as the debt mounted. In 1979, Congress enacted a parliamentary rule that essentially automatically raised the debt limit when a spending bill was passed. Congressional Republicans repealed that rule in 1995 to try to gain leverage over the priorities of President Bill Clinton. This led to government shutdowns in 1995 and 1996 causing furloughs for hundreds of thousands of government employees. Failure to raise the debt limit have resulted in several government shutdowns and caused the US’s credit rating to be downgraded.
Economists largely agree that if the US defaults on paying its debts it would create a worldwide financial calamity. Even the risk of such a default can produce effects in the world’s economy particularly with respect to interest rates (causing the cost of government operations (and mortgages, auto loans and credit card rates) to increase)– paradoxically increasing spending.
It may seem quaint from our current vantage point, after years of dysfunctional government, but the proper place to achieve (or thwart) spending priorities is via persuasion and compromise when debating and amending budget proposals. If a particular party hasn’t the numbers to impact spending by the majority party, well, as is often said: “Elections have consequences.”
Since House Republicans have threatened to employ a refusal to raise the debt limit to extract concessions from the Biden administration, it is incumbent among Democrats to take measures to prevent them from weaponizing the debt limit in this way. Democrats must also be very vocal about what they are doing and why AND they must counter specious argumentation about “out-of-control spending” with the facts about what the debt limit is.