Complaining about the debt ceiling instead of the debt problem is akin to blaming the police for a crime spree instead of the criminals. Yet this has become the habit of both Democrat and Republican administrations who want a blank check for more debt without even a single promise of fiscal reform. With Trump administration officials engaging in the same game, it’s time for conservatives to ask: Isn’t this the swamp mentality we elected Trump to drain? Moreover, how will he ever obtain any leverage to enact some of his spending cuts, if his administration officials plan to give away their biggest leverage point?
After refusing to fight for his FY 2017 budget and selling out to the Democrats in an unprecedented and unconditional surrender, despite controlling all branches of government, the debt ceiling is the only major leverage point through which the president can enact some of his FY 2018 budget cuts. Yet, this week, the president has signaled that he will side with liberal Treasury Secretary Steven Mnuchin over OMB Director Mick Mulvaney and ask Congress for a “clean” debt ceiling increase — so, another dirty debt increase.
Many conservatives have grown accustomed to blaming the colossal failures of this administration on the pathetic GOP congressional leaders and the presence of a permanent liberal “deep state” within the executive branch. Those are both valid concerns. However, nothing is stopping the president from actually taking a leadership role and demanding specific conservative legislative reforms, including a promise to veto any debt ceiling increase that doesn’t adopt some tenets of his budget. Yet instead, he has appointed liberal “shallow state” advisers and cabinet members who are siding with the swamp. Now the president himself is getting taken in by those advisers.
Mr. Trump must remember that it’s not too late to do the right thing.
The lie about a default on our credit
There is only one way we will default on our credit – if we fail to pay the interest payments on the debt. In reality, even if we fail to raise the debt ceiling, especially in the short run while we get our fiscal house in order and address the true debt crisis (not the debt ceiling “crisis”), there will be plenty of tax revenue to cover those debt payments, the military, national security functions, and the key social programs.
Here is the budget math on an annual basis:
The Treasury is projected to receive a total of $3.4 trillion in revenue and spend $3.963 trillion this year. This means we must incur another $560 billion in debt to fund the leviathan. But 86 percent of our projected expenses are still covered by the revenue, even without issuing more debt.
Interest on the debt is projected to cost $270 billion. There is no reason that can’t be paid. Thus, there is no default. Period.
As for the rest of government, although it’s more relevant to break down the costs on a monthly basis, we will use annual expenditures paired against annual revenue figures just to demonstrate an approximate balanced budget … sans the waste.
The remaining $3.13 trillion in revenue (after paying for the interest on the debt) is enough to cover the following:
- Social Security - $800 billion
- Medicare - $590 billion (minus offsetting receipts)
- Defense - $593 billion
- Veterans - $105 billion
- Homeland Security - $42 billion
This leaves about a trillion dollars to prioritize or reform in various aspects of federal worker pensions ($100 billion), Medicaid ($389 billion), other welfare programs ($300 billion) and the more critical elements of the other discretionary departments (totaling over $500 billion).
This is what any responsible family would do with its own budget. Maybe you’d ultimately take out a line of credit one or two more times before you became solvent, but you wouldn’t do so before cutting your budget, prioritizing immediate expenditures, and ensuring that debt is not a permanent fixture.
The debt ceiling was imposed during World War I in order to ensure that even during a time of war, the spigot of debt would not flow indefinitely. And that was long before we had a $20 trillion debt and faced a long-term crisis of insolvency.
Trump must reverse course on debt ceiling
As we have demonstrated, there is no rush to raise the debt ceiling. And if Trump supports the Freedom Caucus effort to cancel the August recess, there will be an extra month to actually work out some budget cuts and structural reforms. With just control of the House in 2011, Republicans secured the Budget Control Act in return for raising the debt ceiling. That was when the debt stood at $14.3 trillion. For Trump to sign a blank check with control of all branches would be another epic betrayal of his campaign.
Rather than echoing Democrat talking points about the debt ceiling and default, Trump should use the bully pulpit to demand a lowering of the debt floor. He should promise to prioritize payments for critical programs and interest payments, while working for major structural reforms on welfare programs and enactment of some of his discretionary spending cuts. The president should remind Democrats of President Obama’s opposition to raising the debt ceiling in 2006 when he was a senator. And that was when the debt stood at just $8.6 trillion. Here is what Obama had to say at the time (of course, he reversed course when he was president):
Increasing America’s debt weakens us domestically and internationally. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.
The president would be wise to break out an old idea from his vice president. When Mike Pence was in the House, he proposed a Spending Limit Amendment, which would have automatically limited spending to no more than 20 percent of GDP, except when there is a declaration of war. At present, outlays correspond to 20.7 percent of GDP, so this is a very pragmatic request of Congress. The problem is that if we fail to get our fiscal house in order, outlays are expected to skyrocket to 28 percent of our economy in 20 years.
Failure to change course and take a leadership role in the debt ceiling fight will represent the last chance to achieve anything positive on fiscal policy. Republican appropriators are already preparing an immediate surrender on the FY 2018 budget by passing another terrible omnibus bill, before the August recess, for the remainder of this fiscal year. If Trump goes along with the culture of capitulation and gets nothing in return for raising the debt ceiling, he will have gone backwards from the accomplishments of even the Boehner-era House. That would be an epic fail.