Friday, February 05, 2010

The Debt Ceiling And The Republican Hypocrisy

On page 4 of the print edition of the Richmond Times Dispatch today I read about a “$1.9 trillion debt increase.” The first line of the story reads, “The House yesterday voted to allow the government to go $1.9 trillion deeper in debt. . .” The vote in the House (as the earlier one in the Senate) was mainly on party lines—every Republican representative voted against it. In the words of Republican leader John Boehner, “This debt is being piled on the backs of our kids and grandkids with no relief in sight.”

Well, beloved reader, you know that I have been ranting about our prolific deficit spending almost as long as I have been a maven. So you would think I would be happy with this show of fiscal responsibility from the Grand Old Party. Unfortunately, this vote in the House is all about party politics. It enables the Republicans to go into this year’s elections claiming that only they (not the evil “tax and spend” Liberals) care about the national debt. The trouble is that Mr. Boehner and all the other House Republicans are deceiving the American people. They full well know that the vote to raise the so-called debt ceiling has nothing to do with the size of our national debt.

Wait maven, how can you say that the debt ceiling has nothing to do with the national debt?

Well, inquisitive reader, here’s how it is. Under the Constitution only the Congress has the authority to borrow money on behalf of the United States. But, a long time ago the Congress delegated this authority to the Secretary of the Treasury. To make sure that the Secretary does not go too far, the Congress has set a maximum amount of borrowing that the Secretary may engage in. That is what we refer to as the debt ceiling. It is not really a debt ceiling but a ceiling on what the Secretary can borrow.

Maven, I still don’t understand what you are talking about.

Look, reader, the annual deficit (and cumulatively the national debt) is established by the tax laws, the permanent appropriations for mandatory spending and the annual appropriations for discretionary spending. Since Ronald Reagan began our deficit habit, each year the amounts appropriated by the permanent and annual appropriations acts exceeded the amount that the government received in revenues (with the exception of the last two years of the Clinton Administration). That’s what created our massive debt.

Another thing: Appropriations do not provide actual money. Rather they provide obligational authority, which allows heads of departments and agencies (or their delegates) to incur obligations on behalf of the United States. Only the Secretary of the Treasury (or government disbursing officers to whom he delegates authority) can disburse money to pay off these obligations. Making these payments is not a problem so long as there is a sufficient balance in the Government’s checking account to cover them. But, when the cupboard is bare, the Secretary of the Treasury must borrow money to cover obligations as they fall due. This is done through the issuance of bonds, notes, bills and the like. The Secretary can borrow enough money to cover the government’s obligations up to the amount of the debt ceiling. When the government’s borrowing reaches that limit the Secretary may no longer borrow.

So, the Congress MUST raise the debt ceiling periodically to allow the Secretary to get enough funds to pay off the government’s obligations. If they refuse to do so, nasty things, like the government defaulting on its obligations, may occur. As you might imagine, for the United States to default on its obligations would have disastrous effects on the world economy. For the Congress to refuse to raise the ceiling on borrowing when it has caused the deficit would be highly irresponsible.

This gets us back to John Boehner and his fellow Republicans in the House of Representatives. They can afford to vote against raising the debt ceiling only because they know that the House (as the Senate did earlier) has sufficient votes to raise it without them. Afterwards they will be able to accuse the Democrats of increasing the deficit.

And, here is where the Republican hypocrisy shows itself. For the eight years of the Bush Administration, these same members of the House when they were in the majority voted repeatedly to raise the debt ceiling. They also had a large role in increasing the national debt by about $5 trillion during those eight years. So, how come when the Democrats control the White House and the Congress these Republicans suddenly start worrying about the debt. To see the Republican record on accumulating debt, take a look at “Republicans Sure Ain’t Conservative With Federal Checkbook”.

And, it’s not only the Republicans that are deceiving the American public. The headline in the TD, as well as the first line of the story, is wrong. There is nothing that the House did yesterday that will allow the debt of the United States to increase. All it does is allow the Secretary of the Treasury to pay our bills. I would hope that the TD, and other members of the media, would learn the facts before they publish such blaring and inaccurate headlines.

1 comment:

Keith said...

Sorry Bert, Regan did not begin deficit spending. Peacetime deficit spending began with FDR. It abated a bit during Eisenhower's terms, then picked up again during the Kennedy/Johnson years. Regan was simply carrying on a precedent firmly established by Progressives. He admittedly increased deficit spending during his term. But since that spending drove the Soviet menace from history, I suggest forgiveness.