Debt Ceiling Solution

There should be a convention of wordsmithers on the debt ceiling. Raising the debt ceiling sounds like rewarding someone for bad behavior. Suspending the debt ceiling sounds much better, but it’ ‘s really a game of kick the can down the road. Then there is Minority Leader of the House, Kevin McCarthy simple, direct, and completely wrong statement:

“we have paid for everything the Trump administration spent.”

“But it wasn’t paid for,” says Marc Goldwein, senior vice president for the nonpartisan Committee for a Responsible Federal Budget (CRFB) . The Trump administration spent more money than they were taking in. So Trump like every other president for the last 20 years ran a deficit and three times the debt ceiling was increased.

Link: Fact-checking partisan claims on government spending under Trump

Senator Elizabeth Warren has got the right solution. Abolish the debt ceiling. She said the following:

“Me? I’d get rid of the debt ceiling altogether. It serves no function except to create leverage for people who are willing to blow up the economy,” she added.

The GAO estimated that the delay in raising the debt ceiling during the debt ceiling crisis of 2011 raised borrowing costs for the government by $1.3 billion in fiscal year 2011 and noted that the delay would also raise costs in later years.[45] The Bipartisan Policy Center extended the GAO’s estimates and found that the delay raised borrowing costs by $18.9 billion over ten years.[46]

That’s the consequences of a delay. Defaulting on our obligations would be much worse.

Link: Warren calls for removing debt ceiling during lame-duck Congress

I think the best argument to get rid of it, is that it is redundant. Congress already controls the budget and taxation. Also, borrowing to cover shortfalls, really does make economic sense. The Covid-19 Relief Act kept our economy going, when people could not work, particularly in the hospitality area. Trying to pay for this with increased taxes would make no sense.

Link: Wikipedia, US Debt Ceiling

So, what Senator Warren is proposing, makes complete sense and would benefit Americans from cliff hanging partisan battles in Congress. What other country has a legislature that tries to crash the economy unless he does what they want?

Stay tuned,

Dave

Debt Crisis – What’s not True

“The past debt ceiling paid for everything in the Trump administration, plus seven months of this Biden administration.”

— House Minority Leader Kevin McCarthy (R-Calif.), in an interview on Fox News, Sept. 21

The Washington Post call McCarthy’s statement “highly misleading.” Debt accumulates when the government spends more than it takes in. However, the cause of this debt can occur much earlier, when the legislature authorizes spending and changes to tax laws.

So, Trump’s 2017 tax cuts for the wealthy and business owners have contributed to increased debt since the debt ceiling was suspended in 2019. The CARES act, was a 2.2 trillion dollar program, signed into law by President Trump in response to the economic fallout of the COVID-19 pandemic in the United States. Democrats and Republicans supported the suspension or increases in the debt ceiling three times under President Trump.

Republicans and Kevin McCarthy are real hypocrites, because the debt ceiling must be increased as a result of spending bills and tax cuts they supported during the Trump administration.

Republican refused to approve increases or suspension of the debt ceiling in 2011, 2013, 2014 and 2015 while Obama was president until we were at the brink of exhausting all extraordinary measures to keep from defaulting on our debt. Then suddenly raising the debt ceiling was ok, under the Trump administration.

The US credit rating fell after the 2011 debt ceiling crisis, which increases the interest we pay on our debt obligations, even though in the end, the debt ceiling was raised.

Honestly, the debt ceiling should not exist. Per Wikipedia: In January 2013, a survey of 38 highly regarded economists found that 84% agreed that, since Congress already approves spending and taxation, “a separate debt ceiling that has to be increased periodically creates unneeded uncertainty and can potentially lead to worse fiscal outcomes.” Only one member of the panel, Luigi Zingales, disagreed with the statement. Rating agency Moody’s has stated that “the debt limit creates a high level of uncertainty”and that the government should change “its framework for managing government debt to lessen or eliminate that uncertainty”.

Stay tuned,

Dave

Links:

Washington Post, White House rules out concessions over debt ceiling while GOP refuses to help avert crisis

Washington Post: McCarthy’s misleading claim that 2019 debt-ceiling hike paid for all of Trump’s policies

Congress Must Suspend or Raise the Debt Limit

Wikipedia: Debt Ceiling

Wikipedia: History of Debt Ceiling

Politifact Kevin McCarthy’s Honesty

Mostly “Pants on Fire” or “False” statements.