Lincoln * Institute

Colin A. Hanna

Colin A. Hanna

President
Let Freedom Ring, USA

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Let Freedom Ring

The Truth About the Debt Ceiling

by Colin Hanna
 

Last week's vote in the House of Representatives to repeal the ObamaCare bill is more than just an honoring of various campaign pledges — it's an encouraging first indication that the new Congress may actually have a backbone.

There will be other tests in the next few months, but none may be more significant than the coming vote to raise the debt ceiling. The Obama administration and the Democratic leadership in the House and Senate, and their minions in the mainstream media, are crowing that it must be raised by March 31, or catastrophic economic damage would result. This is a false argument.

Furthermore, a recent Reuters/Ipsos Poll showed that 71% of Americans oppose raising the debt ceiling. I think it's also safe to assume that even more than 71% of Americans don 't truly understand the debt ceiling, so what we have is a large proportion of Americans opposed to a move that people do not really understand being proposed by the Administration. That is a certain recipe for political peril. It is also an opportunity for genuine political leadership. Political leadership is more than just doing the people's will. True political leadership is the process of moving the people's will, through education and persuasion, to a new and different place. That's the fundamental challenge here.

If the people understood the full impact of the federal government defaulting on its debts, they would never choose it. So part of the task is to gently, seriously and effectively educate the public on why the debt limit must be increased. The underlying problem is of course overspending. That's how debt gets created in the first place. Democrats are almost always happy to address overspending by increasing taxes. Republicans almost always suggest spending cuts instead.

The November elections suggested that the public now prefers spending cuts over tax increases by a larger margin than at any other time in recent memory. It is thus easy for them to conclude that spending cuts can be made that will avoid the need to raise the debt ceiling. As appealing as that common-sense argument may be, it is, in this case, inaccurate. There are technical reasons involving complex intra-governmental transfers within some of the entitlement programs that will compel an increase in the debt ceiling even if huge spending cuts are enacted. Cuts take a while to take effect, and in the meantime, the debt ceiling will be exceeded. But it won't be exceeded in March. It will reach the serious action-must-be-taken stage in May or June. That gives the Congress time to do the hard work of both informing the public and taking serious steps to rein in runaway spending.

Former Senator Phil Gramm makes the point in clear and compelling terms when he likens our out-of-control national spending to the out-of-control credit card spending of one member of a family. Once the level of irresponsible overspending is realized, it must be stopped. Even when it is addressed, however, there are some charges still in the system — not yet on the bill, but surely on their way. However high the level of debt, the other members of the family simply must pay it. Bankruptcy should be out of the question. But, and this is the key point of the analogy — those other members of the family must cut up the credit card so that new irresponsible spending is stopped.

Since 2006, The Bush and Obama administrations, using the excuse of deficit spending to stimulate the economy, have increased overall federal debt by a stunning 70%. The new Congress has an opportunity to show true political leadership by insisting on stopping the overspending even while it permits the smallest possible increase in the debt limit to avoid default. The deadline isn't March, but it's surely before the end of June. That's not a lot of time to educate the public to recognize that raising the debt limit is not an irresponsible act — but that raising it without reining in spending would be irresponsible.

Our national debt to GDP ratio is the highest since World War II — by a lot. It has gone from roughly 70% to over 90% in just the past couple of years. If this Congress is up to the challenge it faces, it will take the hard steps required to restore our economy. If it does not, either by not raising the debt ceiling or by raising it without putting in real spending controls, we will be headed down the path of countries like Greece — except that there's no other economy in the world strong enough to bail us out the way that Greece is being bailed out.

If this crisis had come upon us while the Democrats enjoyed large majorities in both the House and Senate, the Obama Administration would almost surely have put us on the path to economic ruin by raising the debt ceiling without cutting spending. The Republican House now stands alone as the guardian of our economic health. This week shows that they may be up to the task. For our nation's sake, let us hope and pray that it is so.

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