WASHINGTON -- The Concord Coalition today urged elected officials to promptly raise the federal debt limit and then reform the debt limit process as part of a comprehensive plan to put the budget on a more responsible course.
“There should be no delay in voting to increase the debt limit. Despite its name, the debt limit has never proven to be an effective means of controlling debt. And yet, failure to raise the debt limit risks serious long-term harm to the nation’s creditworthiness,” Concord says in a new issue brief on the federal debt limit.
Concord notes that if the debt limit is not raised, “All of the same obligations would still accrue. The only change would be to compel a default on commitments that result from past policy decisions. . . . It has always been assumed, for good reason, that the United States of America would pay its bills. Refusing to pay some or all of its bills would not be an act of fiscal responsibility; it would be turning the federal government into a deadbeat.”
In the issue brief, “It’s Time To Raise and Reform the Statutory Debt Limit,” Concord points out that neither party has presented a plausible set of policy options that could prevent the federal debt from exceeding the current $16.394 trillion limit. The budgets proposed last year by President Obama and House Republicans, for example, would each require a substantial increase in the debt limit. So would the bipartisan plans recommended by the Simpson-Bowles commission and the Domenici-Rivlin task force.
Concord also reiterated its long-standing call for sweeping fiscal reform: “With an unnecessary crisis over the debt limit averted, Congress and the President should promptly develop a comprehensive, specific and credible plan to place our nation on a sustainable fiscal path. Lawmakers should consider the entire federal budget to be on the table –including entitlement programs, domestic discretionary spending, defense spending, and revenues.”
The immediate goal, Concord says, should be to stabilize the debt as a share of the Gross Domestic Product within the next decade, if not sooner. Eventually the debt could then be reduced relative to the size of the economy.
“Achieving such a plan would require tough negotiations over specific spending and tax policy options that can get the job done,” Concord said. “They should not be over the government’s ability to pay for obligations it has already incurred.”
A key problem with the federal debt limit as it is currently used is that it places no restrictions on specific tax and spending decisions. When the limit is reached, Congress and the President have little choice but to simply raise it.
“The ‘fiscal cliff’ legislation recently signed into law by the President illustrates the problem of making policy decisions without regard to their effect on the debt limit,” Concord said. “ The Congressional Budget Office estimates that the policies in that bill will increase deficits by $4.6 trillion over 10 years relative to what had been current law. And yet, no increase in the debt limit was included to accommodate the projected cost.”
To make the debt limit mechanism more effective, Concord suggests, “Congress should more closely align debt limit increases with the fiscal policy decisions that create a need for more borrowing.” For example, Congress could require the inclusion of a debt limit increase in any bill that is expected to require borrowing that will exceed the limit.
Concord’s issue brief also includes background information on the history of the debt limit, special measures the Treasury can use to postpone a potential default, and the costs that can result from delays in raising the limit.
The full issue brief is available at http://concordcoalition.org/issue-briefs/2013/0114/its-time-raise-and-reform-statutory-debt-limit
For additional information, please contact Steve Winn at (703) 254-7828 or [email protected] .
The Concord Coalition is a nonpartisan, grassroots organization dedicated to fiscal responsibility.