The national debt ceiling
Published 12:00 am Thursday, January 1, 1970
The U.S. government has spent more than it received in revenue in 42 of the past 46 years. Those annual deficits constitute our national debt, now approaching 20 trillion dollars. Trying to apply the brakes to this problem is one of the more challenging issues facing the United States Congress and all of us. During the current fiscal year ending September 30th, the federal government spent about 587 billion dollars more than it received in taxes and fees. The government must borrow money to cover the deficit.
To solve the national debt problem, we have to increase taxes or spend less money. Both of those solutions meet fierce resistance. The best that the congress has been able to do is to put a ceiling on the amount of debt the government can accumulate, an attempt to moderate the growth of the national debt. But a debt ceiling is not a solution; it is a delaying action. Without additional tax revenue or reduced spending, the debt continues to increase, and, periodically, the congress must again raise the debt ceiling. The debt ceiling is currently 19.8 trillion dollars. The U.S. Treasury expects to reach the expenditure limit in September. The congress must raise the debt limit so that the Treasury can borrow more money, or the Treasury cannot pay the bills, or, at least, cannot pay all of the bills on time.
Raising the debt ceiling can be contentious. In the past, some members of congress advocated not raising the debt limit, thus causing the government to default, that is, fail to make some payments or make delayed payments. That would have serious consequences. It would damage the reputation of the United States and probably would, as advocates of freezing the debt ceiling desire, make it difficult for the U.S. Treasury to borrow money. The interest cost for our national debt this year is 404 billion dollars. If the government fails to pay its bills on time, the interest cost will increase because interest rates reflect risk. Projects could be delayed or cancelled, and funding for some federal programs might cease. Federal employees might not be paid when scheduled. That would be a crude way to limit the national debt.
During the past half century, politicians and political parties have promised to reduce taxes claiming that doing so will cause a surge in the American economy. Taxes have been reduced, and there has been a surge — in national debt. Someday, we are going to have to face reality.
The debt curve ball will zip over the plate in September, and the congress will have to swing. Don’t expect a home run.
Jack Stevenson is now retired from military service. He served two years in Vietnam as an infantry officer and worked three years as a U.S. Civil Service employee. He also worked in Egypt as an employee of the former Radio Corporation of America (RCA).