DAILY EXPRESS
To the Limit
by Daniel Gross
n October 14, just a few hours after President Bush repeatedly called for "fiscal sanity" in the third presidential debate, the world's wealthiest and most powerful economy maxed out its credit card: The national debt--which includes $4.32 trillion to investors in the form of bonds and $3.1 trillion owed to Americans in the form of IOUs to Social Security recipients and federal retirees--hit the statutory limit of $7.384 trillion. As a result, the Treasury Department suspended sales of some bonds, and Treasury Secretary John Snow informed Congress of his intent to stop buying securities for a federal pension fund. But the logical next step--which should be for Congress to raise the debt limit--hasn't happened.
Raising debt limits has always been an uncomfortable exercise. And now the Republicans, who converted the issue into a political tool in the 1990s, have managed to turn the debt-limit gun on themselves.
In 1995, House Speaker Newt Gingrich refused to vote to raise the debt limit, deliberately raising the specter of default in an attempt to get President Clinton to strike a deal on a budget plan. When Treasury Secretary Robert Rubin borrowed from trust funds for government employee benefits to keep the government operating, congressional Republicans exploded. As Rubin wrote in his memoir, "Congressman John Mica (R-FL) testified that our use of the trust funds' cash made me a thief. ... In a meeting I had on Capitol Hill, a Republican congressman mentioned talk about impeachment to my face." After the disastrous government shutdowns in late 1995, Gingrich and his allies eventually gave in and raised the debt limit. And when surpluses arose in the late '90s, the debt limit lost its currency as a political tool.
That is, until recently. By design, President Bush and the Republican Congress have massively increased the federal debt in the last three years with gigantic tax cuts and huge spending increases. In 2003, to accommodate the profligacy, Congress raised the debt limit dramatically--by $984 billion, or about 15 percent--figuring it would be enough to tide the government over through 2005. After all, addressing the issue in an election season would raise an uncomfortable question: How had one-party rule by the GOP produced an unprecedented orgy of debt creation? Since the fall of 2000, the total national debt has risen 30 percent.
But the rapid increases in spending and the sluggish growth in federal revenues brought the crisis to a head sooner rather than later. And even those with poor vision could see it coming. After all, the Bureau of the Public Debt updates the debt outstanding in minute detail every day. On August 2, Treasury Secretary John Snow wrote Congress, informing it of the need to raise the limit soon.
But to acknowledge the need to raise the debt limit would be to acknowledge both the existence and the importance of the deficit. Since Dick Cheney has it from Ronald Reagan that deficits don't matter, that was a non-starter. And so congressional leaders tried to boost the debt limit quietly, by attaching it to a defense appropriations bill. When Democrats and a few moderate Republicans objected, the leadership essentially gave up. With the acquiescence of the White House, Congress finished up its work for the fall without acting on the debt limit. It did find time, however, to pass legislation that added significantly to the debt--the giant, pork-laden corporate tax bill.
Since Rubin had managed to run the government once it breached the debt limit, the White House figured John Snow could do the same until Congress returns in a lame-duck session in November. The Treasury Secretary announced last week that he plans to free up government cash by not buying debt on behalf of a federal employee pension fund and instead giving it IOUs that won't count toward the debt limit. So far, of course, no Republican in Congress has called for impeachment.
The debt limit and the lingo surrounding it may sound arcane. But aside from exposing the hypocrisy of congressional Republicans, the handling of the debt limit speaks volumes about the way the administration and Congress have handled fiscal policy.
The modern Republican party loves to control government but apparently has little taste for governing. Making sure you have the resources to fund and pay for the goods and services the government needs for its operations--like, say, the war in Iraq, or protecting the homeland--is a basic responsibility of Congress and the Treasury Secretary. Instead, they have treated it as an afterthought. By pushing the debt-limit decision off until November, Congress and Bush have done exactly what they've done with other difficult fiscal questions. They've punted it into the future. The back-loaded tax cuts, the Medicare prescription plan, the reform of Social Security, cutting the deficit--all are to be dealt with in a second Bush term.
Most telling of all is the claim of selective presidential impotence. When the White House wants legislation to pass, President Bush speechifies and turns on his charm, Karl Rove twists arms, and the full power of the executive branch is brought to bear on wavering congressmen. When it's not particularly interested, it sends letters, dispatches ineffective salesmen (like Snow), or does nothing at all. In one debate, Bush absolved himself of responsibility for allowing the assault weapons ban to expire by lamely saying that Tom DeLay told him the votes weren't there.
Kerry could--and should--argue that the debt limit fiasco proves the Bush administration and its congressional allies are unfit for fiscal command. In the middle of a war, the government has intentionally squandered its capability to borrow as it sees fit. And to pay for continuing operations, it's using assets that rightfully belong to workers.
Most distressing is the cavalier attitude the administration has adopted. It assumes that Snow will continue to shuffle federal assets until November without consequence. That overlooks the possibility of turmoil in the massive and crucial bond markets. And it ignores the potential for mischief. Let's say the election produces significant changes, or a deadlock. The lame duck Republicans could simply refuse to act, or raise the debt limit by only a tiny amount--thus delivering an instant crisis to the incoming Kerry administration.
Such an outcome isn't regarded as likely by the administration. "It's unthinkable that Congress would not act to increase the debt limit," a Treasury spokeswoman reassured me yesterday. Um, isn't that what just happened?
Daniel Gross writes the "Moneybox" column for Slate. |
