In the final news conference of his first term, President Barack Obama called the increasingly real specter of a U.S. default "irresponsible" and "absurd." Yet the absurd has become sadly commonplace in Washington.
Perennial fights over the debt ceiling are more than a distraction ? they are hugely damaging to the U.S. economy, preventing a more robust recovery and driving up the nation's long-term deficit as nervous lenders demand higher interest payments. Yet these battles show no sign of abating, as Republican lawmakers continue to view the debt ceiling as a bargaining chip with which to elicit deep spending cuts.
Obama got it right when he said, "We've got to stop lurching from crisis to crisis to crisis." One way to avoid these tiresome disputes would be for Congress to give the White House power over the debt ceiling, so the U.S. can avoid a sideshow that threatens the "full faith and credit" pledge made to those who buy U.S. debt. Republicans, however, reject this as a power grab by the White House.
So here's another way to end the fight: Tie spending decisions to automatic increases in the debt limit. The premise is simple ? when Congress passes a budget resolution or spending bill, it should also authorize a concurrent increase in the statutory debt limit to pay for what it's authorizing. This would have the added benefit of fostering fiscal restraint by linking spending decisions to the Congress that authorizes the money. If that local airport runway (or, as the case may be, "Bridge to Nowhere") is in the budget, then the Treasury Department can raise the debt limit to pay for it. No additional congressional action would be necessary.
The Treasury reached its statutory borrowing limit on Dec. 31 and is now using extraordinary measures to pay for the government - essentially shifting money among accounts and suspending some payments. The U.S. could exhaust those measures as early as Feb. 15 and would be unable to meet $175 billion of its obligations in the following month.
Although some think Treasury could prioritize interest payments to forestall default, a 2012 report by its inspector general shows how hard it would be. Treasury makes more than 80 million payments a month, largely through an automated system that pays bills as they come due.
What Treasury would probably do is delay all federal payments until it had enough cash on hand and pay its bills on a day-by-day basis. The U.S. wouldn't send a single Social Security check, Medicare payment or military paycheck until taxes and other receipts freed up enough cash to do so. And this is the course of action deemed least harmful by Treasury, which acknowledged it was likely to cause "great hardships to millions of Americans and harm to the economy."
There are important reasons to reduce how much money the U.S. borrows. The place to do that, however, is through regular budget negotiations ? as spending decisions are being made. Linking spending bills with an automatic borrowing increase would also put an end to the debt-ceiling theater.
Source: http://www.scsun-news.com/silver_city-opinion/ci_22379753?source=rss
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