What To Know -- And What To Remember -- About The Debt Ceiling

@LucianKTruscott
What To Know -- And What To Remember -- About The Debt Ceiling

Former President Bill Clinton

I write explainer columns like this one whenever they seem necessary. What’s also necessary is keeping this column from running a deficit. You can help out with that by buying a subscription right here.

If you’re anything like me, these periodic tussles over the debt ceiling, like the one that officially got underway yesterday, are one of those “whatever the hell that is” things you would rather not get too far into for fear of losing what’s left of your functioning brain cells. But we’re here, so let’s burn off a few more synapses trying to understand what the hell is going on.

It all starts with the budget. That’s the thing that the Congress is supposed to pass and the president is supposed to sign by April 15 of each year. The way it’s supposed to work is, Congress passes tax laws, the Treasury collects the taxes, and Congress appropriates money to spend on the various functions of the government – for defense, homeland security, law enforcement (the Department of Justice), education, health, the State Department, and all the other ways our tax dollars are spent.

In the years – yes, there have been a few – when the amount of taxes collected equals or exceeds expenditures, then the budget is said to be balanced. From 1970 to 1997, the United States ran budget deficits year after year. That means, the government did not collect enough taxes to cover our expenditures. In 1999, 2000, and 2001 under President Bill Clinton, amazingly, there were budget surpluses. Then George Bush was elected, the Republicans went on a spending spree (chiefly on “The War on Terror” after the attacks on September 11), while at the same time going on a tax cutting spree, quickly reducing taxes twice. When Bush, at a meeting of his cabinet, asked an innocent question about the wisdom of cutting taxes while one war was going on in Afghanistan and another, against Iraq, was being contemplated and planned, his vice president Dick Cheney answered, “It’s our due,” and they went ahead and cut taxes.

We’ve run a deficit ever since. What that means is, we have to borrow the money we didn’t take in from taxes in order to fund the expenditures that exceed tax revenue. We do that chiefly by issuing bonds, which are bought by governments (like China), banks, insurance companies and other organizations like labor unions, and individuals seeking a place to invest their money safely. The reason U.S. government bonds are considered safe is because they are backed by what is commonly referred to as “the full faith and credit of the U.S. government.”

It's not talked about much, but this is apparently the case because the Constitution contains a clause, “The validity of the public debt of the United States … shall not be questioned,” that guarantees the federal government will pay its debts.

There are a lot of “buts” involved in the entire mishigas of the way taxes are collected and budgets are set and money is spent on government programs in this country. This is a gross simplification, but the biggest “but” involves the essential difference between our two political parties. The Democratic Party wants the government to do stuff that helps keep the country going and people from starving and being homeless and so forth, so the Democrats are generally in favor of larger expenditures in the budget for reasons like those, and that means Democrats are more likely to be in favor of higher taxes (chiefly on the rich). The Republican Party is less disposed to want government to spend on so-called “entitlement programs” and more disposed to want to cut taxes (chiefly on the rich). This means, in short, that we spend more money than we take in.

It's important to note that the budget deficits we run are to cover money that has already been spent from appropriations in the previous year or years. In other words, it’s as if we used a credit card to buy stuff we already have and now it’s time to pay for it.

The debt ceiling is a law passed by Congress that puts a limit on the borrowing the government can do in any fiscal year or portion of a year. The debt ceiling has been modified, or raised, more than 100 times since World War II to cover the borrowing we have done through issuance of our government bonds. The fight that arises periodically over the debt ceiling is usually associated with one party controlling one part of the government and the other party controlling the other part, which is where we are right now. The Democratic president in the White House proposes budgets, including deficit spending, and the now Republican-controlled House is supposed to pass them with negotiations over how much should be spent and how much taxes should be collected to cover those expenditures, including how much money should be borrowed to cover the excesses that arise from spending exceeding tax revenues.

This involves periodically raising the debt ceiling so more money can be borrowed to cover the debts we have already incurred in the previous year, which in this case, was in the previous Congress. Republicans have discovered that they can hold raising the debt ceiling hostage so they can achieve with blackmail what they couldn’t achieve at the ballot box, which would be the last Congress, which they did not get enough votes to control, which passed the continuing resolution which substituted for the budget that didn’t pass, no budget having been passed since 2015.

I’m sure that I’ve probably gotten some things wrong in this down and dirty summation of the situation we find ourselves in, but isn’t it fascinating? Doesn’t it hurt your head?

It hurts mine, too, but the only thing you need to remember as this clusterfuck over the deficit plays itself out is this: it’s both parties’ responsibility, but it’s the Republicans’ fault.

Lucian K. Truscott IV, a graduate of West Point, has had a 50-year career as a journalist, novelist, and screenwriter. He has covered Watergate, the Stonewall riots, and wars in Lebanon, Iraq, and Afghanistan. He is also the author of five bestselling novels. You can subscribe to his daily columns at luciantruscott.substack.com and follow him on Twitter @LucianKTruscott and on Facebook at Lucian K. Truscott IV.

Please consider subscribing to Lucian Truscott Newsletter, from which this is reprinted with permission.

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