According to Treasury Secretary Timothy Geitner, the United States reached the federal debt limit and, forgive the pun, is living on borrowed time.
Created to keep the president from borrowing money into infinity without any input from Congress, the debt ceiling is one of those "must pass" pieces of legislation that always is controversial any time it comes up for a vote. In an era of divided government, it is also a flash point for conflict between the Republicans, who want to limit federal spending, and the Democrats, who think that spending the taxpayers' money is the reason they are elected to office.
It is likely but not certain that the government can keep operating until late February or early March until there is no more room to maneuver. At the point, Congress will have to take up the issue or the government will be forced to shut down—which is somewhat misleading since the president is empowered to keep essential employees at their posts even if there is technically no money to pay them.
In the 1980s this led to what has become known as "the Washington Monument strategy": shut down the visible aspects of the federal government like national monuments and national parks, threaten to stop sending Social Security checks to retirees, and do other high profile things the American people cannot avoid noticing while keeping much of the machinery of government running under emergency authority.
It worked as long as a majority of Americans viewed a shut down as a bad thing. Now, however, it is not clear that they do. Many believe a shut down over the debt ceiling would demonstrate a sense of seriousness about bringing spending under control and would be a much needed shot in the arm for advocates of fiscal restraint.
The Republicans are not pledging to shut the government down over the debt ceiling but, as the Wall Street Journal's Stephen Moore explained following an interview with House Speaker John Boehner, they recognize its approach gives them needed leverage in the fight for fiscal responsibility as they prepare face off against Barack Obama and the Democrats who control the Senate.
"The debt bill is 'one point of leverage,'" Moore quotes Boehner as saying, adding that he "he also hedges, noting that it is 'not the ultimate leverage.'"
"He says that Republicans won't back down from the so-called Boehner rule: that every dollar of raising the debt ceiling will require one dollar of spending cuts over the next 10 years. Rather than forcing a deal, the insistence may result in a series of monthly debt-ceiling increases," Moore writes.
Boehner's preferred option, say senior congressional aides, is to pursue what is known as regular order rather than pursue a negotiated agreement involving the White House and the Senate. Pass a debt ceiling bill, send it to the Senate, and then call on senators to fulfill their constitutional obligations. In his interview with Moore, Boehner acknowledges that would have been a better course of action during the recent fight over the so-called fiscal cliff.
"What I should have done the day after the election," Boehner told Moore, "was to come out and say: The House has done its work. The House passed a bill that replaced the sequester with real spending cuts. The House passed a plan extending all of the current tax rates. We passed a budget. We call upon the Senate to do their work."
The stakes are high. If Congress and the president cannot agree on a path toward fiscal restraint, events may push it down the road to bankruptcy. Spending is a problem, despite what Boehner says President Obama told him. So too is the lack of growth in the economy. Rather than tax hikes married to spending cuts—the so-called shared pain approach that too many people advocate—the right solutions lie in some combination of spending restraint, which is not really that hard to do especially if, for the first time in more than a thousand days the U.S. Senate would pass a budget, and pro-growth tax cuts and regulatory relief. As has been said before, the private economy cannot grow when the federal government is growing, which is legacy of the Obama presidency: Four years and counting of real and auspicious growth in the federal government at the expense of the private sector.