WASHINGTON -- With the Treasury Secretary again forced to take extraordinary measures to avoid breaching the $5.95 trillion statutory debt limit, The Concord Coalition said today that Congress should prevent an unnecessary debt crisis -- now estimated to hit in June -- by swiftly approving an increase in the debt limit. Concord recommended that such legislation should be advanced on its own without awaiting agreement on other contentious issues, such as the FY2002 supplemental spending bill, and that the amount of increase be substantially less than the full $750 billion requested by the Bush Administration. An increase of roughly $250 billion would be sufficient for now without providing a blank check.
“The bottom line is that the debt limit must be increased quickly, even if voting to do so causes embarrassment for politicians who last year boasted that they would eliminate the publicly held debt by the end of the decade. The desire to avoid embarrassment does not justify playing a game of political chicken with the nation's creditworthiness at stake,” said Robert Bixby, Executive Director of The Concord Coalition.
Because fiscal policy in the post-surplus, post-September 11 environment still is quite uncertain, The Concord Coalition emphasized that no large scale increase in the debt limit should be approved until Congress and the President agree on a new plan to balance the budget again without using the Social Security surplus. Such a plan should use prudent economic and fiscal assumptions. It should also include an extension of the discretionary spending caps and the pay-as-you-go provision for tax cuts and entitlement spending that expire this year. The rationale for this trade-off is clear: greater flexibility to increase the debt is allowed, but only within the context of a fiscally responsible policy goal.
“Concord shares the concerns of those who are reluctant to approve a debt limit increase in the absence of a broader balanced budget agreement. But this concern is better dealt with by immediately approving a smaller increase than the Administration requested, not by threatening a damaging and totally unnecessary default. It should also be noted that dubious policy decisions, including last year's 10-year series of escalating tax cuts, had much less to do with the recent surge in borrowing needs than did a slumping economy and its effects on the federal budget. Moreover, the majority of the debt increase over the past year is attributable to intergovernmental trust fund debt, which would have grown by about the same amount regardless of fiscal policy decisions. The unique circumstances of the past year justify a modest, immediate debt limit increase even as politicians engage in a needed debate over fiscal goals and policies,” Bixby said.
The Concord Coalition is a nonpartisan, grass roots organization dedicated to balanced federal budgets and generationally responsible fiscal policy. Former U.S. Senators Warren Rudman (R-NH) and Bob Kerrey (D-NE) serve as Concord's co-chairs and former Secretary of Commerce Peter Peterson serves as president.