Despite the fact that Republicans control the presidency and Congress, they have failed to raise the federal government’s debt ceiling, and it’s costing U.S. taxpayers a lot of money.
Congress authorized the accumulation of federal debt on a case-by-case basis until the 1917, when the U.S. entered World War I. That year it decided to establish an overall federal debt ceiling to provide more financial flexibility in order to finance the war effort. Since then, Congress has continued the strategy of authorizing debt ceilings.
In recent years, however, the authorization of debt ceiling increases has become a politically contentious process, despite the fact they are needed to pay for expenditures that have already been made. So Congress has resorted to temporarily suspending the debt ceiling. During these suspensions, the U.S. Treasury is authorized to borrow enough to pay all of the government’s existing commitments, irregardless of the most recently authorized debt ceiling. But when the suspension expires, the debt ceiling reverts to what it was before the suspension. The most recent suspension was passed in November 2015 and expired in March 2017, which reinstated the 2015 debt ceiling.
Subsequently, the Treasury has been unable to borrow enough money to meet its obligations since then, because the federal government has a budget deficit. They have been limping along using some accounting tricks. But it’s estimated that these emergency measures will be exhausted by the beginning of October.
This means that, unless the debt ceiling is increased before then, the federal government will be in default on its bond interest payments, which will hurt the nation’s credit rating. It will also be unable to pay other bills and there will be at least a partial government shutdown. Furthermore, the federal government’s 2018 fiscal year begins on October 1, and Congress still needs to approve annual appropriations bills. If these budget issues aren’t soon dealt with, there will be some very big problems.
But even if they get these things done in time, the Republicans have already cost us a lot of money. That’s because the “extraordinary measures” the Treasury has been forced to use to fund the government since March are more expensive than issuing government bonds, the method the Treasury normally uses to raise the money it needs to pay the bills that exceed the revenue collected from taxes. (Paying interest on bonds is relatively inexpensive these days because the Federal Reserve has been holding down interest rates in order to stimulate the economy.)
On July 26 Republican Senator James Lankford of Oklahoma said during a Senate hearing that the Treasury’s extraordinary measures in 2017 had already cost taxpayers $2.5 billion. Trump’s Treasury Secretary Steven Mnuchin did not dispute the amount and agreed the situation was creating extra costs. It’s undoubtedly cost us much more than that by now.
The reluctance of Congress to raise the debt ceiling is driven by the growing concern about the increasing federal debt, which began a dramatic increase during the Reagan administration. Economists say that the reduction of federal budget deficits must be accomplished with a combination of spending cuts and tax increases in order to avoid harming the economy. But these types of political agreements are difficult, and far-right congressional Republicans have made them more so in recent years by using the authorization of debt ceiling increases as a weapon to engage in political brinkmanship, such as the government shutdown they instigated in 2013. They seem oblivious to the fact that their behavior is making the thing they’re worried about worse.
Solving these important federal budget issues is also complicated by the fact that President Donald Trump has exhibited an alarmingly limited understanding of how the U.S. government works. He’s publicly criticized the Congressional Republicans he needs to work with, including Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan. And he’s threatened to shut down the federal government if Congress doesn’t authorize funds to build the wall he wants to erect along the Mexican border. In addition, there’s the need to pass legislation as soon as possible to aid the victims of Hurricane Harvey. Furthermore, Trump’s decision to end the Consideration of Deferred Action for Childhood Arrivals (DACA) program in six months has added major immigration reform to Congress’s agenda.
In the meantime, Congress seems to be making little headway on Trump’s tax reform and infrastructure spending proposals – two of his major campaign promises. And, of course, there are the constant distractions created by his controversial behavior, along with the ongoing investigations into his presidential campaign’s collusion with Russia during the 2016 election. The whole situation is pretty much a scary clown show.
Liked this post? Follow this blog to get more.