I have a very naïve question. Why is abolishing the legal debt ceiling, i.e. automatically increasing the debt ceiling when Congress appropriates more money that it has, the right solution to the nearly annual ritual of raising the debt ceiling? Why isn’t declaring any House bill that would raise spending above cash on hand out of order the solution?
I don’t know the original source but I think that this applies here:
“If you placed all the worlds economists end to end they couldn’t reach a conclusion “
We don’t know when it will reach the end of it’s rope,
but MMT is not going to go away without creating an absolute economic disaster.
I compare and contrast government spending with family spending perimeters.
Families have budgets reflecting the limits of their earned income levels. If they don’t heed these limitations there are penalties and negative consequences.
Governments, OTOH, don’t rely on earned incomes, but on revenues from other people’s labor. And, if that doesn’t cover expenditures they create more money. IOW, the skill sets of those running the government are not based on good management of the money on hand, but rather on how to manipulate and expand power through the favors money will give them.
Basically, the value of money means little to those in DC, as there is no accountability when it is mishandled. Consequently, those in power treat, for example, a 3.5 trillion bill ask as if it were being paid for in a game of Monopoly money.
I forget the actual number, but something like one-third of all federal spending is financed by borrowing. From another perspective, the US economy is incapable of producing enough tax revenue to support the federal government.
This is mainly due to de-industrialization. We exchanged a high profit, high wage, high tax economy for a service economy that is low profit, low wage and low tax.
The issues now are: (1) will interest rates rise significantly? (2) will the US debt as a ratio of GDP continue to rise? If the US cannot service its debt, the game is over.
I think this is a great idea. Lets do it when the GOP is in control. Of course you, like Republicans look only at the spending side. I would suggest that we apply the same principle to tax cuts, that is if you are making a principled argument.
Steve
I think the answers to Dave’s questions are that the budget and the debt ceiling are independent constraints. The budget resolution is a concurrent resolution of the House and Senate that does not require the President’s approval. The debt ceiling, as amended from time to time, is law passed by Congress and the President, so a subsequent budget resolution btw/ two houses would not supersede two houses plus the President.
There’s been some speculation about minting a trillion dollar coin, or a handful, and paying the national debt down by “monetizing “ it.
Slight of hand.
Actually at that juncture spending the full faith and credit as if it were boundless.
Reckless and desperate actions. IMO.
“I think this is a great idea. Lets do it when the GOP is in control.”
So do I. Let’s do it when anyone is in control. How about a more modest proposal? Hold spending flat for 3 years. Not inflation adjusted. Absolute dollars.
Of course you, steve, are full of shit because spending under a constraint would force a massive rationalization of spending, given ability-to-tax realities. If you weren’t just blubbering partisan snark and, rather, making a principled argument you would acknowledge that you will pull the lever for spenders every single time. Complete with rationalizations and impassioned pleas. Every, single, time.
I’d vote for someone willing to go for that constraint, even at the risk of being labeled a minarchist or anarcho-capitalist. Egad!
What I have actually said over and over is that I am a bit agnostic about spending and the size of government. In general smaller is probably better but not always. What I would prefer is that revenue more closely resemble spending. Essentially using a market type mechanism to determine what people really prefer. If we think services are too low but people arent willing to pay higher taxes then they dont really want those services. If people think taxes are too high but they dont want to give up services then the taxes arent really too high.
Which means I cant really support the modern iteration of the GOP. Prior to Reagan the GOP generally made an effort to balance budgets. At least with the Tax AND spend party there is a chance that things even out. With a healthy economy during the Clinton economy we saw some progress and some actual debt mitigation. Then we get Trump and once again a debt financed economy, even when the economy was pretty good.
The GOP should be the ones to do this. They avoid doing anything economically unpopular like the plague. (Ok, they actually seem to embrace the plague, at least for their voters, so maybe not a good analogy.) Perfectly happy cutting taxes. I want to see if they can actually bring themselves to control spending. I think it goes badly and they bail. You guys are debt junkies and wont be able to give it up.
BTW, noticed how you totally avoid the tax issue. You seem to b totally OK cutting taxes knowing that it would leave us without enough revenues to met projected spending. For you modern conservatives that constitutes fiscal responsibiity.
Steve
To repeat the position I have staked out I’m less concerned about bigger government or smaller government that in right-sizing. In some things we should be doing a lot less and in a few things more. Further I think the federal government is generally a poorer choice than state or local government.
Centralizing policy infantilizes state and local government.
The debt ceiling was always intended as a political constraint. It really serves no other purpose.
“To repeat the position I have staked out I’m less concerned about bigger government or smaller government that in right-sizing.”
That’s generally my view. And just look how the current legislative process is divorced from that.
Services can also be described as “freebies.†Those who pay little to no federal taxes support anything the government is willing to give them, free of charge – school lunches/breakfasts, food stamps, tuition, housing, medical care, including for anyone who resides in this country illegally. Here in CA, we have wide open arm policies because of Newson’s limitless check book, giving CA the dubious distinction of being #1 in homelessness, poverty, and down near the bottom in education.
So, how has rampant state government spending helped CA? The answer is it hasn’t, and it doesn’t help the country either to have such a lopsided ledger of incoming versus outgoing monies. What I’ve observed here in CA is what Democrat treasurer Bill Lockyer said, during his 2007-2015 term, that democrats should learn fiscal restraint from the republicans. Of course that kind of constructive criticism didn’t go over well with the Dems, and did nothing to curb the furthering of social programs, as the revenue from tax increases grew. This is because no amount of taxation will ever satisfy the enormity of the safety net social progressives demand to be installed here in the U.S.
The debt ceiling is a political constraint, but it is manifestation of a key pillar in “democracy” — that the legislature has primacy in all fiscal matters of the government (“power of the purse”, “no taxation with representation”).
That’s why a debt ceiling in some shape or form has existed since the beginning of the Republic.
I believe some of the fiscal problems of the federal government that include the buffoonery around raising the debt ceiling is due to the dysfunctional congressional budget process. My preference is reform the congressional budget process (50 years old now, so overdue for reform) rather then get rid of the debt ceiling altogether and absolve congress of another part of its fiscal responsibility.
Here is a reform of the budget process, how about sharply limiting Presidential veto’s of Congressional budget bills, so only an absolute majority of the House and Senate is required to override?
I don’t believe the problem is that the Congress does not have power; I think it’s because they would prefer not to exercise it. If you leave fingerprints people can campaign against you on that basis.