No one is quite sure what to do about the debt ceiling.
The Obama stimulus has pushed federal spending up near 25 percent of U.S. gross domestic product—well above its historical post-war average of around 18 percent. The failure of the economy to rebound strongly from the recent recession has revenues down.
Together this creates a potential crisis, putting the federal government within an eyelash or two of reaching the debt ceiling—the legal limit on the amount of money the federal government may borrow—which is currently set at just over $14 trillion.
If the debt ceiling is not raised, says the Obama White House in particular, then the U.S. government may be forced into default for the first time in its history.
The White House wants the government to be allowed to borrow more money without having to make any deals with congressional Republicans to rein in spending. That, say sources inside the GOP on Capitol Hill, is a nonstarter. What the GOP proposes to do, however, is still up in the air. [See a slide show of 6 consequences if the debt ceiling isn't raised.]
The soft position is that any agreement to raise the debt ceiling be tied to serious and real cuts in federal spending. The tougher one ties any increase to a major cut in the projected deficit for Fiscal Year 2012, putting a cap on total federal spending, and the adoption of a balanced budget amendment to the U.S. Constitution that includes both a super-majority requirement to raise taxes and a permanent cap on spending tied to U.S. GDP.
A recent letter to House Speaker John Boehner and Majority Leader Eric Cantor—signed by a majority of the House Republican Conference—endorses the tougher position, calling for “discretionary and mandatory spending cuts to halve the budget deficit next year, spending caps to hold Washington’s spending to 18 percent of gross domestic product and passage of a balanced-budget amendment.” [Read the U.S. News debate: Does the U.S. need a balanced budget amendment?]
Party conservatives off Capitol Hill also favor the tougher approach, and are in the process of drawing endorsements from a number of national organizations. The GOP leadership’s position, however, is somewhat ambiguous. It has yet to endorse the approach, known as “Cut, Cap, and Balance.”
It is almost certain that there will be a vote on the balanced budget amendment, but the timing of the vote and the form it will take is, for now, something that can only be guessed at.
Some who are involved in the issue fear the leadership will push for a quick vote on the amendment because they expect it to fail—even though neither Boehner nor any member of the House or Senate GOP leadership has made a public commitment either way. [Check out a roundup of political cartoons on the budget and deficit.]
A “hurry up” vote that is sure to fail would likely be interpreted by the grassroots as an effort to dispense with the constitutional amendment it rather than pass it, thereby removing it from the list of potential preconditions for a debt ceiling deal. As a political strategy, it’s dumb. It's one that will only alienate the base the Republicans need to win the White House and control of the Senate in the next election.
The better approach, the case for which will be made in the coming weeks, is to give conservatives time to make the case for a tough balanced budget amendment to the American people and to let them have a say in the outcome.