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After being suspended by Congress as part of a bipartisan deal that capped some federal spending in June 2023, the federal debt ceiling was back in place last week. U.S. Treasury Secretary Janet Yellen has told lawmakers that the country is likely to hit the debt ceiling later this month.
That means members of Congress will have to move quickly to raise or suspend the debt ceiling as they return from the holiday recess.
Raising or suspending the debt ceiling is politically fraught with many Republicans and Democrats alternately supporting or opposing such moves depending on whether their party controls the presidency and Congress.
Several weeks ago, President-elect Donald Trump sought to have the debt ceiling eliminated, which could clear the way for an extension of big tax cuts that were enacted during his last term as president and other expensive proposals, such as immigration enforcement action. Those tax cuts, which were passed in 2017, were not paid for with spending cuts and they are estimated to have added nearly $2 trillion to the national debt. An elimination of the debt ceiling was ultimately not included in the bill that was passed to avoid a government shutdown in December.
In a dysfunctional Congress, where basic tasks like funding government operations too often involve brinksmanship and last-minute agreements, debates over the debt ceiling are another form of political theater. The ceiling — essentially a cap on the amount of money the federal government can borrow — is a useful tool for politicians to seek to limit programs and spending that they do not support.
However, such maneuvering often skips over needed, and overdue, debates about federal spending, tax cuts and national priorities. To be thorough and productive, such discussions take time and typically don’t happen with the pressure of a deadline, or when they are tied to must-pass pieces of legislation.
Although the debt ceiling problem is serious and time is short, the full consequences of not raising or suspending the ceiling are not expected to come until the summer. So, now is the time for members of Congress to begin earnest conversations and negotiations about priorities.
Republicans are likely going to want to extend the 2017 tax cuts that are set to expire at the end of this year and to cut some spending, but likely spending would not be trimmed enough to offset the revenue lost from lower taxes. Democrats, who are in the minority, will likely want to limit both tax cuts and reductions in spending.
It is important to remember that the debt ceiling is largely not about future spending. The ceiling must be raised to account for federal spending that lawmakers, including many Republicans, have already approved. Without a debt ceiling increase, the U.S. could default on its payments, which economists warn will harm the global economy and U.S. citizens.
When the ceiling is reached, the Treasury Department can do some creative things in the short term to avoid the U.S. defaulting on its debt. By June, without action to raise the ceiling or to eliminate all together, spending cuts would have to come and some payments, such as Social Security, military benefits and tax refunds could be delayed.
While some may cheer forced cuts, this is not a responsible or thoughtful way to curtail federal spending. Instead, Congress should go back to the days of preparing and passing actual spending plans, not continuing resolutions, like the one passed at the last minute last month to avoid a shutdown. These measures essentially keep the government on auto pilot.
The Senate Appropriations Committee, which is now chaired by Sen. Susan Collins, offers a model. It has negotiated and advanced spending plans for the various government agencies and programs on a bipartisan basis.
We understand that the debt ceiling is a politically valuable pressure point. But, careening from budgetary crisis to crisis, whether they are real or politically motivated, is no way to govern. The debt ceiling must soon be increased or suspended to avoid grave economic consequences in the U.S. and around the world. A vote to do so, however, must not be used to force approval of harmful spending cuts or tax cuts that are both expensive and unpaid for.
