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.