There is, to begin with, the hysterical doomsaying about the horrors that await us if the debt ceiling isn't raised — "financial Armageddon," "irreparable harm," "a cascading catastrophe." There are the furious accusations of partisan bad faith, as Democrats blast Republicans' "shameless" and "cynical" hard line against hiking the debt limit, while Republicans point out that Democrats control Congress and the White House and can raise the limit on their own. There is the charade by which both sides pretend that they don't know how this standoff is virtually certain to end: Democrats will offer Republicans some modest concession, and the increase will be passed with GOP support.
But above all, there is the utter irresponsibility of lawmakers on both sides of the aisle who, amid all the howling about the dire threat facing the United States if the government cannot meet its financial obligations, have done nothing to slow the soaring rise in the national debt.
The Treasury's legal borrowing authority, which was temporarily suspended for two years in 2019, was reinstated on Aug. 1 at the then-current level of $28.5 trillion. That is far and away the greatest amount of money the government has ever owed, whether in absolute dollars, in dollars adjusted for inflation, or, most important, as a percentage of gross domestic product — that is, as a share of the nation's annual economic output. During wars and other times of severe crisis, federal spending and borrowing understandably rise. Thus, the national debt spiked during World War II and the immediate postwar recession, reaching 119 percent of GDP in 1946. Then, as the emergency receded, the government's debt was dramatically reduced. By the early 1980s, the national debt amounted to no more than 31 percent of the size of the US economy.
The national debt today, however, clocks in at a 125 percent of GDP — not to cover the staggering costs of a world war, but to pay for metastasizing entitlement programs that now consume two-thirds of the federal budget. Yet Congress, far from mobilizing to pay down that debt, is busily adding to it. Just days after hitting the new debt ceiling, the Senate by a large bipartisan majority passed a $1 trillion infrastructure bill, at least one quarter of which will have to be financed through new borrowing. Notwithstanding the supposedly looming "financial Armageddon" of the debt crisis, in other words, Democrats and Republicans joined in a vote that will worsen that crisis. Meanwhile, even as Democratic leaders and their allies excoriate the GOP for refusing to raise the debt limit, they're working to finalize a massive $3.5 trillion spending package that will saddle the government — which really means American taxpayers and the US economy — with even more indebtedness.
Anyone who follows politics knows that Washington is frequently awash in hypocrisy. But when it comes to pointing the finger of blame during debt-ceiling battles, the duplicity reaches flood levels.
As a presidential candidate, Barack Obama blasted George W. Bush for his "irresponsible" and "unpatriotic" record of "driving up our national debt from $5 trillion . . . [to] over $9 trillion." When Donald Trump ran for president in 2016, he vowed to cut the national debt "very quickly" — unlike Obama, who, he said, "truly doesn't have a clue." Last month, President Biden took to the bully pulpit to blame the top-heavy debt load on his predecessor, whose "unpaid tax cuts and other spending" added trillions to the national debt.
In fact, every recent president has claimed to be a paragon of fiscal responsibility who was clear-eyed about the dangers posed by a sky-high national debt. And every one of them signed spending measures, mostly passed with bipartisan backing, that sent debt streaking to even more stratospheric levels. Under Bush, the total owed by the federal government grew by $4.9 trillion. Under Obama, by $9.3 trillion. Under Trump, by $7.8 trillion. Biden has been president for only eight months, but the national debt is already $700 billion greater than it was on Inauguration Day.
There has been no end of dire talk about the terrible scenarios that would result from the United States defaulting on its debt to bondholders, but there is zero danger of that happening. As Moody's, the credit-rating agency, explained during a previous debt-ceiling fight, "the government would continue to pay interest and principal on its debt even in the event that the debt limit is not raised, leaving its creditworthiness intact." Maxing out your credit card doesn't mean you're a deadbeat; it means you have to pay down some of the principal before you can make new charges, and until then can only spend what you earn.
If the debt ceiling isn't hiked, holders of US Treasury bonds aren't going to get stiffed. They'll be fine. Washington this year is projected to raise around $3.8 trillion in taxes and tariffs. That is 10 times the roughly $380 billion needed to service the current debt.
America can certainly cover its interest payments to lenders with what it collects in taxes. But interest is only one narrow slice of federal outlays. What Washington can't cover is the entirety of the $6.8 trillion that the federal government is planning to spend this year — everything from Medicare to government salaries to medical research to highway funding to veterans benefits. As things stand now, roughly $3 trillion — more than 40 cents of every dollar the government spends each year — is borrowed. Those borrowed dollars keep getting added to the debt, which now approaches $30 trillion. Not even the United States can indefinitely keep this up.
What should truly alarm Americans isn't the prospect that Congress might not push the debt ceiling higher. It is the level of spending — and consequently the level of borrowing — that Congress won't stop pushing higher. Reining in the government's runaway outlays is the nation's most urgent financial priority. The cost of not doing so is strangled growth, ever-higher taxes, and the loss of wealth and opportunity for a generation of Americans. Alas, only diehard budget hawks seem to worry about such things more than they worry about scoring partisan points, and Americans no longer send many budget hawks to Congress. We are governed by two reckless spending parties, which play politics as the nation slowly drowns in red ink.