Washington’s Old Pandora’s Box: Analyzing the Debt Limit Debate

In late October 1981, The New York Times ran an article entitled “U.S. Debt Past $1 Trillion.” As long as a Letter to the Editor, the ominous piece quoted a Treasury Department official as saying, “It’s not an issue for celebration.” The Times also stated the U.S. debt had first reached $1 billion 65 years earlier, during World War I.

In the summer of 2011, the government risked defaulting on its debt—which then had a statutory limit of $14.3 trillion. For months the Treasury had listed August 2 as the date when Washington would fail to pay all its bills, which had never happened before. Thus, speculation varied widely. The federal government contended that to avoid this scenario, the debt “ceiling” had to be raised.

Of course, the same problem happened last October, but a partial and brief government shutdown did occur. Fortunately, even the recession-weakened economy withstood the predictions of doom and gloom, as if to say America could survive without such a big government. But I digress.

For much of 2011, Congress and the White House tried to reconcile the long-term risks of a huge debt with the short-term risks of a debt default. Washington’s 500+ elected leaders remained in a deadlock for weeks, but they finally agreed to raise the debt ceiling for the zillionth time—with all sorts of conditions that obviously meant little two years later when a shutdown ensued. Have I digressed again?

Last month the debt almost kissed $18 trillion. The debt accumulated $7.5 trillion during the first 25 years after 1981. Then every two years between October 2006 and October 2014, it grew $2.0 trillion, then $3.2 trillion, then $2.5 trillion, and finally $1.7 trillion. The debt swelled by a record $550 billion in October 2008. In 18 months since then, the debt has grown by $150-$450 billion. Before 2008 no month ever saw an increase of more than $110 billion. The federal debt has risen in 76 of the last 83 years.

Democrats and Republicans regularly trade accusations over whose plans better serve the nation, who is talking too much, and even whose accusations are too condescending! Many key national leaders agree on four things. They oppose defaulting on the debt. They favor spending cuts. They want to be careful with Medicare and Social Security. And some try to work out their differences in person, like President Barack Obama meeting with congressional leaders from both parties.

In a July 2011 Fox News article, Vice President Joe Biden said Republicans “believe that 1% of the wage earners controlling 24% of the wealth in this country is a vehicle by which you can spur economic growth.” The next day USA Today cited House Speaker John Boehner declaring that a Democratic plan would “increase taxes on small businesses and destroy more American jobs.”

As usual, pundits were as focused on the issue as politicians. Left-leaning CNN listed a number of negative outcomes if the government would not raise its debt ceiling on time: “Interest rates may skyrocket. The dollar might crash. Your 401(k) could tank as markets tremble, the full faith and credit of the U.S. government teeters, and investors flee for safer havens.”

On the other hand, conservative columnist Charles Krauthammer said Treasury Secretary Timothy Geithner “is disingenuous when he suggests that we must raise the ceiling by August 2 or the sky falls. There is no drop-dead date. There is no overnight default¼What scares Geithner is not that we won’t be able to pay our creditors but that his Treasury won’t be able to continue spending the obscene amounts of money.”

Michael Tanner, senior fellow at the Cato Institute, summarized the situation well: “This is not really a debate about budgeting or the size of the national debt. It is a debate about whether we will have a limited constitutional government or a European-style social democracy¼If Republicans get an extra $500 billion in cuts on paper, but leave the structures of big government in place, they will find out down the road that nothing has really changed.”

If Mr. Tanner is right, then whether the country defaults or not—very unlikely since so many politicians specialize in last-minute dramas—the real crisis does not concern any quantity of dollars. Rather, some radical changes must be made to the nation’s economic system and the mentality that governs those dollars.

Please intercede for:

• Spiritual, moral, and fiscal integrity in all levels of government.
• Wisdom and courage for politicians to put country before party.
• God’s saving grace and sovereign mercy to spread across America.

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(Originally published by The Presidential Prayer Team.)