Editorial
Dangerous Games
The debt limit is supposed to make Congress think twice before passing tax cuts or spending increases that add to the national debt. Instead, lawmakers routinely support policies without paying for them — like the Bush-era tax cuts and two wars — and then posture and protest when their decisions require raising the debt limit.
So it will be once Congress returns from its spring recess. The debt limit — $14.3 trillion — will be hit as early as mid-May. If it is not raised in time, the government will have to use increasingly unorthodox tactics to meet its obligations, which would disrupt the financial markets and the economic recovery.
Default is theoretically possible, though public outrage over the mess would likely compel Congress to raise the debt limit before then. The best approach, the most sensible and mature, would be to pass a clean and timely increase.
However, nothing sensible or mature is on the horizon. Republicans have vowed to extract more heedless spending cuts in exchange for their votes to raise the debt limit. To that end, they seem likely to demand changes to the budget process, like a balanced budget amendment to the Constitution, or spending caps.
Such reforms have a glib appeal — who can oppose something as prudent-sounding as balanced budgets? In fact, they are a dodge, because they cut spending broadly without lawmakers having to defend specific cuts. They are also often wired to block tax increases, without which deficit reduction efforts are not only unfair, but also will not succeed.
Take, for example, the balanced budget amendment to the Constitution that Senate Republicans recently endorsed. By rigidly requiring a balanced budget each year, it would deepen recessions by forcing tax increases or spending cuts in a weak economy.
Worse, the amendment would hold annual spending to 18 percent of the previous year’s gross domestic product, a formula that works out to about 16.7 percent in the proposal’s early years, according to the Center on Budget and Policy Priorities. That is a level last seen in 1956 — a time before Medicare, before the interstate highways, when many baby boomers were not yet born, never mind aging into retirement.
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Sharply lower spending would, in turn, allow for big tax cuts. Those tax cuts would be virtually irreversible, since the amendment calls for a two-thirds vote of both houses to raise taxes.
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Another bad idea is the spending cap proposed by two senators, Bob Corker, Republican of Tennessee, and Claire McCaskill, Democrat of Missouri. It would cap spending at around 21 percent of G.D.P., compared with about 24 percent now — which would require deep cuts like those in the House Republican budget plan. With its emphasis on spending cuts, the cap also seems intended to reduce the deficit without tax increases.
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In the successful deficit reduction efforts of 1990 and 1993, budget process reforms were helpful. The key, however, was to first enact credible deficit-reduction packages — with spending cuts and tax increases — and then impose rules, like pay-as-you-go, to prevent backsliding. Process reforms alone avoid the hard work. Still, they can exert powerful political pull.
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The White House and Congressional Democrats must not allow themselves to be taken hostage again.
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