HomeUploadUpload DirectHotlinkRandomAbouttheme toggle

Raising the Debt Ceiling: It Just Makes Sense. Not.

Views: 996
Editor's Note: Go to http://reason.com/blog/2011/03/01/raising-the-debt-limit-it-just for details, charts, and links

Some say the world will end in fire and some say in ice.

But in Washington, a lot of people say it will end if we don't continually raise the debt ceiling.

The statutory debt limit, or debt ceiling, represents the maximum amount of debt the federal government can carry at any given time. The limit was created in 1917 so that Congress wouldn't have to vote every time the government wanted to increase the amount of debt (which was becoming a more and more frequent occasion). Since then, the Treasury Department has had the authority to issue new debt up to whatever the limit is to fund government needs. Last year, the limit was raised to $14.3 trillion, an amount that is about to reached.

As it approaches, Federal Reserve Chairman Ben Bernanke has said failing to raise the limit would likely mean the U.S. would default on its debt, creating "real chaos" in place of the fake chaos that's out there now. Treasury Secretary Timothy Geithner has said that failing to raise the limit would be "deeply irresponsible" and and Austan Goolsbee, President Obama's chief economic adviser, has said that not raising the limit would create "the first default in history caused purely by insanity."

Eh, maybe.

As Reason columnist and Mercatus Center economist Veronique de Rugy, has pointed out, we've maxed out the nation's credit card in the past without such dire results. In the mid-1980s, the mid-1990s, and in 2002, for instance, the debt limit wasn't raised for months at a time and the government got along just swell. The government has a big bag of tools it can use, ranging from playing around with the amount of spending that is liable to the limit to prioritizing interest and debt payments over other outlays. Interest on the debt for this year is projected to be about $225 billion and government revenue is expected to be around $2.2 trillion, so the government can easily pay the vig and avoid defaulting.

What it shouldn't do is simply keep piling on the debt. The limit has been raised no fewer than 10 times in the past decade. When Republicans ran the White House and the Congress, they voted overwhelmingly to charge it and Democrats, including Sen. Obama, hollered bloody murder. In 2006, he called the need to yet again increase the debt limit "a sign of leadership failure." Now that Dems run the show, the GOP has suddenly rediscovered its inner cheapskate.

So it goes.

The boldest plan to rein in spending and debt comes from newcomer Sen. Mike Lee (R-Utah), a Tea Party favorite who dispatched Republican incumbent Bob Bennett in the primaries before coasting to victory in the general election last fall. Lee has vowed to block passage of a debt-limit increase unless Congress signs on to his balanced-budget amendment which would cap annual federal spending at 18 percent of Gross Domestic Product (GDP). The amendment would require a super-majority of two-thirds in the Senate and House of Representatives. Lee's bill is competing with another Republican proposal from Sens. Hatch (Utah) and Cornyn (Texas) to cap spending at 20 percent of GDP. The Hatch-Cornyn bill has weaker rules on its higher cap as well.

In 2010, spending came to about 24 percent of GDP and it's expected to come in around 25 percent of GDP in 2011. Since 1950, total federal revenues have averaged 17.8 percent and have reached higher than 20 percent exactly once. Spending over the same time has averaged just under 20 percent.

Whether Lee's proposal carries the day -- and there's a strong case that its passage would do more to calm financial markets than simply bumping up the federal credit line -- neither the Democratic nor the Republican leadership has yet to advance a serious proposal to cut spending and reduce outstanding debt. Indeed, both the president's budget proposal for 2012 and the generally non-existent Republican response are not only deeply irresponsible but clear signs of insanity.

That ain't right. But it does help explain why a government that has increased spending over 62 percent in real dollars can no longer get by on a $14 trillion debt ceiling.

For more info, go to http://reason.com/blog/2011/03/01/raising-the-debt-limit-it-just

Video written and produced by Austin Bragg. Article text by Nick Gillespie.
@ReasonVidsfollow
Thumbnail for California's Parent Trigger Law: Compton Parents Take on the Public School System8:33
California's Parent Trigger Law: Compton Parents Take on the Public School System
ReasonVids
802 views
Thumbnail for Remy: Best Song Ever! (One Direction Parody - Tax Code Edition)1:55
Remy: Best Song Ever! (One Direction Parody - Tax Code Edition)
ReasonVids
924 views
Thumbnail for Rand Paul on Blocking the Patriot Act, GOP Hawks, and Edward Snowden14:41
Rand Paul on Blocking the Patriot Act, GOP Hawks, and Edward Snowden
ReasonVids
821 views
Thumbnail for The Pilgrims and Property Rights: How our ancestors got fat & happy2:30
The Pilgrims and Property Rights: How our ancestors got fat & happy
ReasonVids
850 views
Thumbnail for The Last Rifleman | YouTube Movies1:39:48
The Last Rifleman | YouTube Movies
invidious
17 views
Thumbnail for Try Not to Laugh Challenge 964 🤣 #funny ⁠#shorts #viral | Jeffrey X0:52
Try Not to Laugh Challenge 964 🤣 #funny ⁠#shorts #viral | Jeffrey X
invidious
93 views
Thumbnail for What's Next for the Libertarian Party After Jo Jorgensen Got 1%?9:28
What's Next for the Libertarian Party After Jo Jorgensen Got 1%?
ReasonVids
930 views
Thumbnail for Bernie Has Pro-Palestine Protester ARRESTED At Bernie/AOC Rally! | The Jimmy Dore Show10:50
Bernie Has Pro-Palestine Protester ARRESTED At Bernie/AOC Rally! | The Jimmy Dore Show
invidious
60 views
Thumbnail for Nothing Else Matters Guitar Cover5:50
Nothing Else Matters Guitar Cover
guitar
476 views
Thumbnail for I should’ve stretched before this 😭🤦🏻‍♀️ #fypシ゚ #funny #relateble #fail #gymnast #blooper #viral | JUSTJULES💖0:07
I should’ve stretched before this 😭🤦🏻‍♀️ #fypシ゚ #funny #relateble #fail #gymnast #blooper #viral | JUSTJULES💖
invidious
138 views
Thumbnail for Nicholas J. Fuentes | MTV Hit Piece1:09:18
Nicholas J. Fuentes | MTV Hit Piece
ABlackpilledDissident
1553 views
Thumbnail for Nina Jankowicz could have been a multi-platinum Wizard Rock star—but when duty called, she devoted her talents to eradicating cyber-sexism in Belarus. A modern day Glenn Miller.0:42
Nina Jankowicz could have been a multi-platinum Wizard Rock star—but when duty called, she devoted her talents to eradicating cyber-sexism in Belarus. A modern day Glenn Miller.
bestofvoatxyz
903 views
Thumbnail for Feds Push Insane New Speech Codes!3:03
Feds Push Insane New Speech Codes!
ReasonVids
670 views
Thumbnail for The Founding Fathers Thought America Was Doomed3:30
The Founding Fathers Thought America Was Doomed
ReasonVids
907 views
Thumbnail for Texas Says 'Pickles' Only Come From Cucumbers. So This Couple's Farm Went Out of Business.4:22
Texas Says 'Pickles' Only Come From Cucumbers. So This Couple's Farm Went Out of Business.
ReasonVids
983 views
Thumbnail for 44 Ways to Say TSA: What do the initials "TSA" really stand for?1:15
44 Ways to Say TSA: What do the initials "TSA" really stand for?
ReasonVids
866 views
Thumbnail for While israeli jews are carpet bombing civilian Palestinians, American jews are busy genociding the native White American population 1:27
While israeli jews are carpet bombing civilian Palestinians, American jews are busy genociding the native White American population
bestofupgoat
488 views
Thumbnail for Quote-Faking Imagine Author Jonah Lehrer: Why I Became a Journalist0:34
Quote-Faking Imagine Author Jonah Lehrer: Why I Became a Journalist
ReasonVids
857 views
Thumbnail for Challenging Affirmative Action and Gerrymandering: AEI's Edward Blum29:09
Challenging Affirmative Action and Gerrymandering: AEI's Edward Blum
ReasonVids
868 views
Thumbnail for EL CORRILLO: RIDÍCULO DE ANA BERNAL TRIVIÑO! KIKO HERNANDEZ ADVIERTE! PEPA BELTRÁN PROMETE DEJARME! | Telesalseo2:44:01
EL CORRILLO: RIDÍCULO DE ANA BERNAL TRIVIÑO! KIKO HERNANDEZ ADVIERTE! PEPA BELTRÁN PROMETE DEJARME! | Telesalseo
invidious
149 views

points

Permalink
Reply
reason.tv, reason.com, reason.org, reason magazine, reason foundation, government spending, budget, debt ceiling, debt limit, ben bernanke, timothy geithner, barack obama, austin bragg, nick gillespie, veronique de rugy
TOS  •  Add Keywords  •  Donate  •   Analytics  •   DMCA  •   Puzzle