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Raising the roof

"Raising the roof" Continued...

Issue: "After Osama," May 21, 2011

Bipartisan support is growing for imposing strict caps on federal spending. Such caps would kick in automatically across the government when federal spending reaches certain predetermined levels. A phased-in federal spending cap of 20.6 percent of the nation's economy, authored by a Senate Republican and a Senate Democrat, would save nearly $8 trillion within a decade.

While conservatives continue internal debates on what to attach to a debt-ceiling vote, others warn that using the nation's debt as leverage could lead to an economic catastrophe. The United States has never defaulted on its debt. Some fear that doing so now would cause a spike in interest rates, further undermine global confidence in the U.S. dollar, and lead to higher inflation.

Former Treasury Secretary Paul O'Neill, who served under George W. Bush, said on April 27 that those holding a debt ceiling increase hostage are "our versions of al-Qaeda terrorists."

But Lankford said a rigorous debt ceiling debate would not create any more trouble than the economic turmoil already caused by $14 trillion worth of debt. The Standard & Poor's rating agency last month downgraded the United States' long-term credit rating from "stable" to "negative." Congress, Lankford said, needs to signal to its creditors that the nation is serious about its debts.

What's not debatable: American finances are on an unsustainable course. Will the summer's ceiling dispute be a watershed moment for this Congress? Sen. Jim DeMint, R-S.C., has promised to "tie the Senate in knots" over the debt problem.

Short of slashing spending by 40 percent (not going to happen), the debt ceiling limit will have to be raised. But a postponement in raising the limit wouldn't necessarily lead to default right away: Revenues would still come to the Treasury, and the government could make paying creditors a high priority. Some analysts have also suggested that the government could sell some of its assets to stave off a default. Meanwhile, only 1 in 10 voters in a recent survey supported raising the ceiling without preconditions, giving conservatives hope that the time is right for a spending debate.

"We've developed this idea that the government is going to be the final security of our future," said Rep. Tim Huelskamp, R-Kan., another freshman on the Budget Committee. "And a government that can't pay its bills is a not a great place to put your faith."

Nothing more than ceilings

The debt ceiling has been increased nearly 100 times since it was established in 1917 and set at $11.5 billion. During the 1980s, it increased from less than $1 trillion to nearly $3 trillion. The debt ceiling limit doubled during the 1990s and doubled again in the 2000s to more than $12 trillion. In February 2010, lawmakers raised it by $1.9 trillion, the largest annual dollar increase, to the current level of $14.294 trillion.
Debt as a percentage of GDP:
2001 ... 56.6%
2002 ... 59.0%
2003 ... 61.8%
2004 ... 63.2%
2005 ... 63.6%
2006 ... 64.0%
2007 ... 64.8%
2008 ... 69.6%
2009 ... 84.4%
2010 ... 93.4%
2011 ... 96.8%

Sources: Committee for a Responsible Federal Budget; White House Office of Management and Budget; Heritage Foundation; Congressional Research Service

Edward Lee Pitts
Edward Lee Pitts

Lee is WORLD's Washington Bureau chief. As a reporter for the Chattanooga Times Free Press, he was embedded with a National Guard unit in Iraq. He also once worked in the press office of Sen. Lamar Alexander.

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