Contrary to Popular Opinion, Debt Ceiling Bill Is Pretty Good

The recently passed debt ceiling bill (Budget Control Act of 2011) that politicians like to say that they don’t like is actually a pretty good law. As a long-term solution to our nation’s debt crisis, it’s inadequate because it doesn’t address the price of health care. But as a short-term solution to our recent political crisis, it’s a solid B+. A democracy can’t expect much better than that.

First, the debt ceiling had to be increased. Stopping the U.S. government from spending more than it brings in beginning Aug. 3, 2011, would have caused a financial calamity costing trillions. Interest rates would have shot up overnight putting our already weak economy on life support. It was easy (and gutless) for some legislators to vote “no” when they knew the bill was going to pass without their votes. However, if theirs was the only vote that counted, I’m confident that only a handful of lunatics in Congress would have voted no.

Second, it’s highly unlikely that the 12-member committee of Democrat and Republican legislators charged with developing a set of proposed budget cuts will ever come up with anything. But if by some miracle they do, it goes to both houses for an up or down vote—no amendments allowed. Overall, that’s a good thing. It should work to minimize pork-barrel spending and hidden agendas.

Third, if the 12-member committee fails to produce a bill or if Congress can’t get that bill passed, then across-the-board spending cuts will be implemented with (and this is the best part) 50 percent of the cuts to come from the defense budget.  Our country spends far more money on “defense” than is necessary to defend its people. In 2010, the United States accounted for 42.8 percent of the world’s total military spending. The next highest country was China at 7.3 percent. Focusing budget cuts on the military is a no-brainer. It will now be much more difficult for military contractors and their lobbyists to block defense spending cuts.

Fourth, the Bush tax cuts are set to expire at the end of next year. It should be easy enough for Congress to extend the cuts for middle and working-class people, but let the cuts expire for high income earners. That will, in effect, raise taxes somewhat on those most able to pay a little more. It will also slightly close the budget deficit and make cuts to programs that working people rely on a bit more politically tolerable.

Last, according to the Budget Control Act of 2011, Congress will vote on a balanced budget amendment to the Constitution by the end of the year. It will take a two-thirds vote in each house to pass the amendment on to the states. It will then take three-fourths of the states to ratify the proposal for it to become the Constitution's 28th Amendment. Hopefully, the difficulty of this process will allow common sense to prevail over political opportunism. There are times when a nation has to spend more than it collects. Wars and natural disasters are the two most frequent causes historically, and nations also go over-budget to  soften economic downturns. These over-budget expenditures are necessary and appropriate for all modern governments. 

Our government’s problem is, we never want to save when times are good and, when we do have to borrow, we never want to pay the money back. It’s not the politicians’ fault either—it’s the people’s fault. We’re generally just as short-sighted and greedy as the people we elect. When our national economy was going strong 10 years ago, we cut taxes and went to war rather than pay down the debt. In Minnesota, with our economy booming, we all got “Jesse checks” rather than building up the state's reserves or paying off our bonds.

When people have the greatest ability to support government, government expenditures are lowest. Conversely, government expenditures are highest when we have the least ability to pay (“and that’s the way it is”). A balanced budget amendment would not account for that fact and would result in unnecessary hardship in difficult times.

The Budget Control Act of 2011 isn’t great, but it accomplished what it had to and it just might get us started down the road to some real solutions. I’d give it a B+.