Raising the Debt Ceiling Is Paying Our Bills

Rep. Andy Barr (R-KY) is confused:

President Barack Obama says we need to pay our bills. I agree. But raising our debt limit without reform is not paying our bills. It is asking China, bond holders and other creditors to pay our bills.

The president says we need to avert a default. I agree. But raising our debt limit without any reform is not averting default. It is merely postponing default. Instead of simply opening up a new credit card in our childrens’ name because we’ve maxed out all of our own, we must take responsibility and stop business as usual in Washington. We owe it to our children and grandchildren to end the spending spree and start making the tough choices that will finally force the government to live within its means.

Here’s how U.S. fiscal policy works: The federal government takes in a certain amount of money and spends a certain amount of money each year. Congress passed laws that dictate what people have to pay to the government and how much the government will spend. In the U.S., the federal government almost always spends more than it takes in. It makes up the difference by taking on debt, but the debt ceiling prevents us from taking on more debt. It doesn’t change how much we’re spending or taking in. When Congress refuses to pay the debt ceiling, it stops us from making up that gap. The amount we owe doesn’t change. We just aren’t paying our bills.

The part about China is particularly bad. Rep. Barr really thinks that raising the debt limit is us asking China to pay our bills? China’s decision to purchase Treasuries has nothing to do with helping the U.S. out. China makes its own fiscal policy decisions that it thinks is best for itself, not the United States.

Finally, raising the debt ceiling without reforms does nothing to our odds of a future default. In fact, the only reason there is a chance the U.S. breaches the debt limit in the future (and I don’t think there is one) is the Tea Party’s willingness to do so. In a sane world, Congress would abolish the debt ceiling and there would be zero chance of a U.S. default, but sadly we don’t live in a sane world. Raising the debt ceiling now only increases the odds of a future default in that it makes Tea Party Republicans even more anxious to commit economic suicide.

Path Set for Ultimate Battle Between Boehner and the Tea Party

There’s an interesting dynamic developing in the Republican party over John Boehner’s proposal for a six-week debt ceiling increase. The Tea Party has hesitantly accepted the idea, arguing that it would separate out the debt ceiling and government shutdown fights. They want to use the government shutdown to stop Obamacare and the debt ceiling to enact entitlement reform. For them, keeping the two crises separate is vital and the short-term deal accomplishes that. Here’s how Sen. Ted Cruz described it on KYFO radio:

My understanding is that this is being driven by House conservatives who are quite reasonably saying listen, let’s focus on Obamacare, on winning the fight on Obamacare, on helping remedy the enormous harms Obamacare is inflicting on millions of Americans, and let’s push the debt ceiling a little further down the road so that it doesn’t distract us from the fight we’re right in the middle of now.

What’s amazing is that Boehner and Republican leadership want the short-term extension for precisely the opposite reason that Cruz and Co. want it. Boehner wants to make a larger deal that includes a continuing resolution and longer debt ceiling increase in return for concessions from the president. President Obama says he won’t negotiate until Republicans reopen the government and raise the debt ceiling, but if Boehner offers a deal with few concessions (repealing the medical device tax or a promise to focus on tax reform, for instance), the president will likely accept it. Boehner, thus, needs time to craft an agreement and rally support for such a deal. That’s why he’s proposed this short-term extension. From Robert Costa yesterday:

But the quiet acceptance of a short-term extension among rank-and-file Republicans gives Speaker John Boehner, who heads to the White House later today, a chance to avert default and eventually craft a larger fiscal bargain. “We’re telling folks, help us here, and we’ll work together moving forward,” says a veteran House Republican. “We know this isn’t perfect, but we’re not living in fantasyland, thinking we can get everything we want before the deadline.”

Rep. Cathy McMorris Rogers, #4 in the House Republican leadership, further emphasized that the six-week deal would give Republican leaders time to “continue this conversation.

This is going to set up a major battle between Boehner and the Tea Party in the next couple of weeks. I argued yesterday that Boehner’s pivot from demanding a stop to Obamacare to demanding a fiscal concession was a major victory for the speaker. I seem to have spoken to early. This short-term deal gives Boehner much-needed time, but when the Tea Party realizes that he’s using it to craft a larger deal on both the budget and debt ceiling, they are going to be livid. How Boehner then attempts to calm them and pass whatever deal he comes to is his next challenge.