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Guest Author: A Martian Views Our Debt Ceiling Crisis

[ Posted Thursday, November 7th, 2013 – 16:44 UTC ]

We haven't done one of these guest columns in a while, and (much to my embarrassment) this really should have run weeks ago (when it was written, in the midst of shutdown and debt ceiling fever). I really have no excuse for the delay, and ask that you blame me rather than the author for it not being more timely, as the fault is all mine.

Professor Kenneth Janda is no stranger to these pages, as we've interviewed him previously, back in the 2008 presidential primary season. Janda is the Payson S. Wild Professor Emeritus of Political Science at Northwestern University. He's written an article that is both informative and amusing, and (sadly) while it was more relevant a few weeks ago, it will also become relevant again the next time we all do this insane dance (currently scheduled for early February). So, please enjoy, as you put yourself in the mindframe of three or four weeks ago. Or three months from now, take your choice.

-- Chris Weigant

 

A Martian Views Our Debt Ceiling Crisis

Welcome to our planet. Sorry that your saucer landed in the U.S. during our messy debt ceiling crisis. I'm happy to answer the questions it prompted you to ask. First: "Is America exceptional among Earth countries in how it funds government?" Yes, the United States operates very differently from most countries that we call democracies. Except for little Denmark, no other democracy has a "debt ceiling." Indeed, no other industrialized country on Earth limits how much the government can borrow and owe.

As you know, Congress has the power to raise and spend public funds. Many citizens think that the debt ceiling caps how much Congress can spend. But it can spend whatever it wants, as long as revenues cover spending. The ceiling only caps how much Congress can borrow to cover the gap between revenues and expenditures. Because Congress typically outspends its revenue, it spends borrowed money, thus incurring debt. Borrowing in one year usually pays debts from a previous year. Unable to borrow additional money, government cannot pay its debts.

Your second question was puzzling: "Does having a debt ceiling contribute to the exceptionally high quality of American government?" Ah yes, this is your first visit. Before answering, let me first explain the origin of our unusual debt limit. Historically, Congress always restricted how much money could be borrowed for specific projects, such as funding the Spanish-American War (1898) and building the Panama Canal (1902). But for over a hundred years, we had no overall limit on government debt.

Not until the 1930s did Congress shift from capping expenditures for separate projects to limiting overall spending. These aggregate limits were intended to provide the Treasury more flexibility -- not less -- in managing the government debt. In 1939, Congress set the first ceiling on public debt: $45 billion, about 10 percent above the actual debt of $40.4 billion.

Congress enacted limits on public debt even after the outbreak of World War II but periodically raised the ceiling to meet war costs. By 1945, the ceiling was $300 billion. During our "Korean War" in the 1950s, it was actually reduced to $275 billion. That war was financed mainly by higher taxes, not increased debt. Unfortunately, we stopped funding military conflicts through taxes; now we borrow money, mostly from foreigners.

By 1962, the debt limit was returned to $300 billion to cover government borrowing. Since then, as borrowing bumped against the debt ceiling, Congress simply raised the ceiling. In the 51 years from 1962 to 2013, it passed 77 measures altering the debt ceiling, virtually always raising or avoiding it in some way. This year, the Treasury reported on September 30 that the public debt was $16.7 trillion, equal to the existing debt limit. On October 16th, Congress did not vote to raise the debt limit but to "suspend" it until February 7, 2014, allowing government to pay its creditors.

I see you nodding approval. Your Galactic Federation -- like Earth's community of nations -- abhors financial default. Congress has indeed avoided default by consistently increasing the government's limit on borrowing. However, periodically raising the debt ceiling is not automatic, and Congress can balk at lifting it.

Although our legislative branch authorizes and appropriates public funds for spending, bills are actually paid through our executive branch, mainly by a Treasurer appointed by our President. Held responsible for the economy's health, the President and the executive branch are more concerned than Congress that the debt ceiling be raised to avoid default.

In 2011, a Treasury report noted that Congress acted 78 times after 1960 to increase the debt ceiling -- 49 times under Republican and 29 times under Democratic presidents. When the same political party controls the presidency and both chambers of Congress, raising the debt limit is almost automatic. When a different party controls one or both congressional chambers, the opposition party can exploit the vote needed to raise the ceiling for partisan gain.

Since the 1970s, when our two major parties began to polarize -- Democrats to the left and Republicans to the right -- both parties have played politics with the debt ceiling. Although House Republicans have opposed Democratic President Obama's proposal to raise the ceiling, Democrats played a similar role in the past.

For example, when Republican George W. Bush was president in the 2000s, Democrats solidly opposed Republicans on four House votes to raise the debt ceiling. In the Senate, Democrats solidly opposed Republicans on three of four votes. Indeed, Senator Barack Obama voted against raising the debt ceiling in 2006, citing President Bush's "leadership failure."

Especially in more recent years, partisan clashes in Congress over the debt ceiling have become increasingly bitter. Attempts to raise the debt ceiling give the opposition a chance to harangue the presidential party or to extract policy gains that have nothing to do with the debt ceiling.

Two constants accompany debt ceiling votes: they provoke partisan clashes in Congress, and they inevitably pass. The vote on October 16th marked about the 100th time (depending on how one counts) Congress avoided the debt ceiling since 1940. The next vote, expected in early 2014, will also pass, but probably not before it again disrupts government.

I note your observation that funding government is more civil and rational on Mars than here in the United States. You asked a third question: "Is government funding also politicized in Denmark, the only other country with a debt limit?" Apparently not, for the Danes' debt ceiling formula computes to more than twice the level of their outstanding debt. Danish governments need not fear exceeding their debt limit.

What's that? "If the U.S. debt ceiling is always raised to accommodate borrowing and if it causes such political turmoil, why not enact legislation to fund government without a ceiling, as virtually all other Earth nations do?" Good question. In fact, Congress' recent vote to suspend the debt ceiling until February 7th effectively removed our peculiar limit on borrowing. If we can avoid partisan gridlock on this issue temporarily, why not permanently?

Does it really take a Martian think of this?

-- Kenneth Janda

 

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4 Comments on “Guest Author: A Martian Views Our Debt Ceiling Crisis”

  1. [1] 
    db wrote:

    "If we can avoid partisan gridlock on this issue temporarily, why not permanently?"

    Does this question really need an answer?

  2. [2] 
    michty6 wrote:

    There are lots of things in America (and other countries but especially America) that our Martian will be confused by. "Why do you let your citizens own extremely efficient, lethal, military, killing weapons when all other democratic countries have outlawed these?" or "Why do you not allow your citizens access to health care so they can prevent themselves from dying - when all other democratic countries offer this?" for example...

  3. [3] 
    Michale wrote:

    "Why do you let your citizens own extremely efficient, lethal, military, killing weapons when all other democratic countries have outlawed these?"

    Stalin's Russia and Hitler's Germany outlawed guns...

    Americans believe in self-defense. NOT in being victims..

    America is the only planet's superpower...

    'nuff said...

    Michale

  4. [4] 
    Chris Weigant wrote:

    micthy6 -

    To say nothing of: "Why are some plant-derived substances allowed to sponsor your biggest religious/quasi-military event of the year (beer, the "Super Bowl"), when others are deemed taboo and people are locked up for distributing them?"

    Heh.

    -CW

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