Five Quick Reasons the Debt Ceiling Argument is a Farce

Bush Obama Deficit trendsDebt Ceiling fights are truly ridiculous.  Here’s why:

#1. The money has already been spent.  The entire “We Need To Stop Spending” argument isn’t applicable to money already appropriated.  If we want to cut future spending the place to do that is in budget and appropriation bills. Everything else is extraneous.

#2. There are three branches of government.  The President, any President of any party, may only recommend a budget or call for appropriations, and then all the incumbent can do is to pressure the Congress to enact the budget or appropriations.  Arm twisting, log rolling, and other negotiating techniques may be applied, but the final say on all money bills is the province of the House, with the agreement of the Senate.  Thus, the fight about a debt ceiling is essentially a matter of the House arguing that the House should not have appropriated so much funding so the House must (or must not) increase the debt ceiling limit.  If this sounds silly, it’s because it is.

#3.  The failure to increase the debt limit increases the deficit. Telling the world that the U.S. may not pay interest on the Treasury bills it has issued for government operations, then the cost of issuing those securities goes up as investors demand higher yields (read interest rates.)  Higher yields mean more debt service payments, and more debt service payments mean we’re deeper in the hole.  The general rule in life is that when you are in a hole — stop digging.  This rule doesn’t appear to apply to House and Senate Republicans.

#4. The debt ceiling argument is a distraction.  Don’t want to talk about reasonable gun control legislation?  Wave the Debt Flag. Don’t want to talk about comprehensive immigration law reform? Wave the Debt Flag. Don’t want to talk about the reemergence of Wall Street machinations issuing debt instruments the interest on which can be paid off with more debt? Wave the Debt Flag.  Don’t want to talk about infrastructure investment? Wave the Debt Flag. Don’t want to talk about re-authorizing the Violence Against Women Act? Wave the Debt Flag.   Don’t want to talk about enacting the American Jobs Act? Wave the Debt Flag.  It is as if the multi-tasking performed by every other human being on this planet becomes a mystery when a person enters the halls of Congress.  Evidently, the House of Representatives gets mesmerized (with the assistance of a compliant press) by the Debt Flag every time it’s waved.

#5.  The institutions which are crying the loudest for debt management, the investment bankers, may have very personal motives.  Not that profit making is a bad thing — but, they want their cake and the eating of it too.  If they invest in Treasury bills, then they’d like to earn as much interest as possible. If the debt ceiling isn’t raised then interest rates on Treasuries will likely go up –and they’d like that. Who wouldn’t?

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