During an interview with Al Hunt on Bloomberg TV, Treasury Secretary Tim Geithner mused that it’s long past time we did away with this dreary “debt ceiling” concept and just let Washington pile up unlimited debt without further Congressional drama:
Basically, Geithner thinks the debt ceiling is a bluff by those interested in fiscal restraint, and Big Government will always be willing to call it. As he pointed out, last summer was the first time in a century of “debt ceiling” poker matches that anyone seriously talked about refusing to raise the limit… and the opposition never really had a serious chance of keeping the limit in place, over the combined objections of most Republicans and all Democrats.
The Treasury Secretary implies that threats to further downgrade America’s credit rating are primarily based on investor fears of the debt ceiling – in other words, the fear that someday it will be taken seriously, and Congress will refuse to raise it, resulting in a fiscal apocalypse of instant spending cuts and tax increases. In fact, the various credit rating agencies – nearly all of which have warned of likely American credit rating downgrades in the coming year – have more pointedly cited American government’s apparent inability to control its deficit spending. There might be some apprehension about a debt ceiling crash, but there is much greater fear that the entire insolvent system will crash.
This is not an abstract fear. Far too many Americans think the national debt is just an abstract number ticking away on a spreadsheet somewhere, but it’s not “abstract” at all. The amount of money spent to finance the interest on that debt is titanic, and steadily increasing; even without credit rating downgrades, it will grow to consume the entire current federal budget in a matter of decades (and would create end-of-the-world chaos long before it devoured exactly one hundred percent of the budget.)
And financing that debt requires selling it, to people who are becoming nervous about the quality of what they’re buying. A shocking amount of our national debt is floated by borrowing it from ourselves – in essence, by printing money – but there really are huge bond auctions to raise funding for Washington’s lavish spending, and they haven’t been going terribly well lately. They might abruptly start going much worse, if the rest of the global economy perks up, and American debt stops looking like the least worst gamble to international investors.
Those factors remain in play whether Congress has to wrestle with debt authorization every few years. (Or, God help us, every few months.) Among the salutary effects of the debt ceiling is the way it actually focuses public attention on our federal spending crisis, generating some headlines for an unpleasant reality that too many Americans would rather ignore. It will be far too late to do anything about our national debt on the day that it becomes completely unsustainable. This is not a bomb we should begin defusing when only ten seconds remain on the timer. One of the reasons why our dependency culture has become such a powerful political force is that people don’t really think about the cost of all their “free” goodies. They should, on occasion, take a long hard look at the pile of past-due credit card notices piling up in Uncle Sugar’s mailbox.