Bolt down the debt ceiling

The full faith and credit of the United States is not what it used to be. Although the level of the national debt as a proportion of the GDP is approaching heights already experienced in the aftermath of World War II, the country is not the same. It is true that American taxpayers – the ones who bear the real burden of servicing government debt – are generally wealthier and materially more prosperous than at any time in U.S. history. But one of the main components of credit worthiness is character. And that character, as reflected in the popular culture and in the conduct of its public institutions, whether corporate or governmental, is a pale quivering shadow of its postwar self.

There is, of course, great doubt – well-founded doubt – that the current governing arrangements in the U.S. federal structure are a true reflection of voter preferences. Either way, the overt prodigality and unconscionable regulatory abuse recently imposed upon us by the U.S. government and some state governments, suggests a national character no longer worthy of credit.

On July 23, 2021, the U.S. Secretary of the Treasury sent a letter of warning to the top leaders of the U.S. Congress that a two-year suspension of the statutory debt limit would end on July 31. That means that on Monday, August 2, the Treasury will no longer be able to service existing debt by issuing additional debt. In the short run, Treasury officials will exercise their financial cleverness through “extraordinary measures in order to prevent the United States from defaulting on its obligations.” But their options will soon run out. The point of the Treasury Secretary’s letter was to urge the Congress to act quickly to raise the debt ceiling sufficiently to avert any potential financial crisis.

The Treasury Secretary did not go to Washington to drain the swamp, so I have little sympathy that she now finds herself up to her ass in alligators. The ever-floating debt ceiling is a symptom of a deeper underlying malaise that goes beyond mere fiscal incontinence. The debt ceiling itself is an artifact of that ancient wisdom, now apparently lost, that we need to treat debt with caution and to avoid it when we can. But progressives, almost by definition, have short memories. And we have reason to doubt that they, the young ones at least, ever learned to read the copybook headings. If the debt ceiling had any meaning to them, or any moral implications, they might be inclined to comply with it. But there is no such moral restraint.

That is the real problem. Debt is just a tool that, in prudent hands, can be used to great benefit. A balance sheet always has two sides, and we can associate an increase in debt with either an increase in assets or the promise of future benefits. When you take out a loan, it matters how you use that money. If you use it to buy business assets that promise to increase your productivity and future cash flow, the lender will look upon you far more favorably than if you planned to spend it on a vacation or perishable consumer goods. The larger your debt relative to your ability to service that debt, the greater the risk borne by both you and your creditor.

This much is true of government balance sheets also. When government activities are restricted to its basic protective functions and some other projects of general benefit, then a new debt issue can be structured to match the expected lifespan of the assets and benefit stream to be financed. But when the government’s fiscal involvement grows beyond the basics into the realm of business subsidies and welfare redistribution, the moral calculus grows more quickly complicated and political agreement becomes much more difficult to achieve.

In July 2021, such political agreement appears to be impossible. Any sentient creature who has witnessed the events of the past year cannot help but to have noticed the increasingly predatory arrogance of the political left and its administrative state accomplices. From their dubiously achieved positions of power, they have inflicted impositions on families, associations, and small businesses of a magnitude, and with a simpering viciousness, that signals a clear break with our founding moral traditions.

After decades of watching political elites repeatedly waste a billion dollars as cover to transfer a few million dollars to their cronies, the majority of us who bear the net burden of the tax-and-spend system are really not persuaded that we need to increase our debt burden also. We know the difference between infrastructure investment and mere consumption, even when it is laundered through income redistribution schemes, supposedly justified by the latest engineered crisis, medical or otherwise. Our national debt structure does not match any detectable stream of new benefits or lasting assets. Trillions are the new billions – and we are getting screwed.

When expenditures of the U.S. government double in one year, it gets very difficult not to notice that we have a spending problem. But it is now also very easy to see what spending must be cut first. For the past century, government spending has been the primary source of our fiscal problems – and the national debt is one of the more visible symptoms. There is no economic or moral reason to raise the debt ceiling and the Treasury Secretary surely knows that.

The District of Columbia is a city of too little faith and too much credit. There are plenty of real problems that need fixing. Any member of Congress who wants one day to be the winner of a fair election should take this message to heart: the debt ceiling is a ceiling.