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A “Totally New Strategy” on the Debt Ceiling

By: AndrewHyman (Diary)  |  January 6th, 2013 at 05:22 AM  | 

RESIZE: AAA

The following numbers explain the current emergency.  In January 2001, the national debt was $5.7 trillion.  By January 2009, it had risen to $10.6 trillion.  A year ago, it was $15.2 trillion.  Now it’s $16.4 trillion.  We are hitting the debt ceiling again.

According to an article yesterday in the Washington Post:

House Speaker John A. Boehner (R-Ohio) … insisted that Republicans hold the line, telling his members they must demand that every dollar they raise the debt limit be paired with commensurate spending cuts.

But former House Speaker Newt Gingrich is calling for a totally new approach:

Former House Speaker Newt Gingrich said Friday that the upcoming showdown over the debt ceiling isn’t a political winner for House Republicans, but dubbed it a “dead loser.” 

“They’ve got to find, in the House, a totally new strategy,” Gingrich said on MSNBC’s “Morning Joe.” “Everybody’s now talking about, ‘Oh, here comes the debt ceiling.’ I think that’s, frankly, a dead loser. Because in the end, you know, it’s gonna happen. The whole national financial system is going to come in to Washington and on television and say: ‘Oh my God, this will be a gigantic heart attack, the entire economy of the world will collapse. You guys will be held responsible.’ And they’ll cave.”

What Congress could do is this.  Authorize a debt ceiling increase of one trillion dollars over two years.  Of course, if that’s all Congress does, then the country would probably burn through the money long before the two years are up, and we’d be back to square one.  That’s why Congress should require that the ceiling rise GRADUALLY over the next two years.  Let the ceiling rise $47 billion per month in the first year, and $37 billion per month in the second year, but no more.  That adds up to about one trillion.

So, during 2013, the debt ceiling would rise gradually by $47 billion per month.  Does that mean we would default on any loans?  Of course not.  Spending would have to be cut, but that doesn’t mean that any interest payments on the national debt would be cut.  After paying interest on the national debt, plenty of money would be left over to help fund the government.  

You may recall that Mitt Romney proposed a ceiling on deductions and exemptions for wealthy people.  A gradual increase in the national debt would work in a similar way.  No spending authorized by Congress would be cancelled, but the president would have to choose which spending to do.

This new strategy would give considerable discretion to the executive branch regarding spending, but the President could not spend on anything that’s not been approved by Congress.  If the President abuses his discretion, then Congress could always pass a new law to remedy the situation. I don’t like giving discretion to the President, but discretion where to cut is much better than not cutting at all.

The first debt ceiling was introduced in 1917, during World War I.  Before then, Congress had to approve every new issuance of debt, and I’m not suggesting that Congress do so again.  The Budget Control Act of 2011 approved incremental increases of the debt limit, but not the kind of monthly gradual increases that I’m suggesting.

In addition to the debt ceiling increase that I have suggested here, Congress could negotiate a followup bill that raises the monthly debt ceiling increases even further, provided that authorized spending is cut by at least the amount of the total debt ceiling increase (including the one trillion of the first bill).  Given that the first bill would safeguard the full faith and credit of the United States, no one should be able to scare Congress into dropping Speaker Boehner’s demands regarding the followup bill.

COMMENTS

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  • bobmark

    Good idea, kind of like putting uncle Sam on a calorie counting diet. Just a little apprehensive regarding the proposal in the last paragraph. Have to make any cuts concurrent or at least in the same f.y. Otherwise they’ll go back to promising not to eat a cheesecake 5 years from now it we’ll just let them have a couple extra candy bars today, and then tomorrow, and the next day, and the next day, and the next, and the next, ….

    • AndrewHyman

      I wish I had a graphic of a really fat Uncle Sam, to illustrate your diet analogy. You’re right that cuts planned for the distant future are easier said now than done then. On the other hand, planning for the future is usually a good exercise (unfortunately I don’t do it much myself!).

  • chumbolone

    Your idea has merit but you are still missing the whole point of what’s going on – and you are focusing on the wrong thing.

    Furthermore, your proposal does not deal with Chicago-style politics. The Chicago political style is highly effective when working with “low information” voters, democrats in general, union members, other governmental “hangers-on” and weepy-eyed spineless liberal republicans (the corporate types).

    First, like most Chicago Pols, Obama is a racist, and highly narcissistic psychopathic bully/weasel who happens to be friendly and personable. It’s no surprise – this is the pedigree of a typical Chicago Pol – which is exactly what he is. In the Chicago world-view “what’s not to like”?. So wise up and try to recall Obama used to be close friends with the now jailed ex-governor of Illinois – Rod Blagojevich. They both came up through the democrat machine in Chicago.

    BUT – he is not the problem to focus on because there is nothing any single person or even group of people (say the House/Senate) can do to alter his behavior.

    The republicans, whatever they are – are irrelevant (until they adopt a transformational strategy).

    The problem, and the focus of attention is, and needs to be, the “47%”, the low information voters AND the “weepy-eyed” spineless republican voters. These are the folks who elected the Chicago Pol. Any action taken needs to address them. It needs to happen soon and it needs to be dramatic. It needs to be – as much as possible – a “near-death” experience.

    In fact, given the idiocy of the last election its probably appropriate if a large number of these voters suffer terribly for their choices. So give them their choice. But don’t dribble it out over 10 years. Given it to them ALL AT ONCE – over a few months.

    So here it is. Give the electorate what they voted for, but do it all at once, do it now. Don’t wait for a fight with Obama, ignore Obama. Have the House Republicans put through a debt ceiling limit that is ASTRONOMICAL IN SCOPE. Double the current national debt now – not in 10 or 20 or 30 years – RIGHT NOW by Feb 2013.

    Bring the debt ceiling to 30 Trillion immediately, but also appropriate for the coming budget year 10 to 15 Trillion in NEW spending. Rebuild every bridge and dam in the country – all at once. Repave every road by the end of 2013. Build a brand new Panama Canal. Put colonies on the Moon and Mars. Fund operations to mine the methane moons of Jupiter! Give every US resident (even illegals) a guaranteed “Lake Wobegon” retirement package and a “job for life”.

    But do it ALL quickly. Let’s see what the political and media discussions are about then. Lets see how the world economy and the bond markets and the Fed all respond.

    Maybe Mr and Mrs 47% will wake up. If not, then it does not matter. If you’re going to have to face armageddon at least do it on your terms.

    • commonsenseobserver

      The New Deal took half a century to make the whole system collapse.

      This can do that in one year.

  • lawstudent

    I’m very, very concerned about getting rolled on the upcoming debt ceiling debate. We have failed to articulate the cuts we are looking for, and have not made the case for aggressively reforming our failed entitlement programs. We should be pounding medicaid every day 24/7, as it is essentially a give away to welfare queens and moochers.

    By signing the terrible fiscal cliff deal, we no longer have the leverage of the under $250k tax cuts that Obama promised to keep in place. Essentially, we have very little that Obama wants, other than even more tax revenue from high income earners, which would turn us into Greece or Sweden.

    I see the endgame here as us refusing to raise the debt limit, and then being portrayed as hostage takers and crazies by the media. At that point the squeamish among us (Boehner) will negotiate a mini-grand bargain, giving more revenue in exchange for modest entitlement cuts and a raised debt ceiling. It’s going to be a massive and disastrous cave, all because we already gave Obama what he wanted, and don’t have the fortitude to shut down the government. Troubled times ahead – we really need new leadership.

    • commonsenseobserver

      You wanted to threaten Obama with bigger tax hikes and broken promises? 0_o

      Deal or no deal, the whole thing was already heading down that path to Greece. I don’t understand the comparison with Sweden, given that it has so far avoided the total descent it deserves because they had the sense to vote to at least slow that down with the Moderates. In fact, Sweden is an example of how effective even a little pinch of conservative policy magic and developing lots of natural resources is, even if hardly sufficient in the long run. We can hardly hope for that here because the thing’s been lasting since the 1930s.

      The cave won’t be automatic under current law, that’s something we know.

  • WmCraig

    No one is going to cut “real” spending. That is no one will cut spending that is scheduled to take place during the current fiscal year. Reduce spending this month? Never, maybe ten years from now, or from the projected spending next year, or next Congress.

    There isn’t support for it.

    • AndrewHyman

      That’s addressed by the last paragraph of my blog post, which applies to both current and long-term spending.

      • WmCraig

        You paragraph addresses how to do it. My comment was targeted at motivation. Once the full faith and credit of the US is safeguarded, it is my belief that no one would bring to the floor a motion that didn’t involve increased spending.

        Your points assume three things. First that Republicans continue to hold the house, that Republicans want to reduce spending, and that the President will allow Congress to constrain his spending. Your ideas are good under those circumstances. I do not think those circumstances reflect the actual circumstances in Washington.

        One technical note, a monthly limit is complicated because the government doesn’t collect all of it’s money in even monthly increments. And it doesn’t spend it that way either. If your plan could work it would have to adapt to that, and I think that would be loop hole that could be impossible to manage.

        The last thing I would like to point out is that because Congress misappropriated Social Security trust funds, there really isn’t a lot of money left over after the paying the interest on the loans to run the government. Until 2010 the amount of taxes collected exceeded the cost of providing Social Security Services, no more and it will get worse every year. Faster if the economy doesn’t turn around. The amount of discretionary spending is close to if not equal to the amount of the deficit. Non-discretionary spending really can’t be controlled through cuts.

        This makes well meaning intents to control deficit spending much more difficult.

        I do think it is a good diary post. We just don’t agree.

        • AndrewHyman

          Thanks for your comments, William. I want to just add that the proposal I’m making would have almost the same effect as a line item veto, but without the constitutional problems. Obama would choose which spending items to fund, and the ones he rejects could be demanded by Congress (over his veto).

          If the first bill that I’ve suggested is enacted, safeguarding the full faith and credit of the US, then Congress can enact all the further spending items it wants; that wouldn’t increase actual spending (due to the debt ceiling).