The arguments in favor of raising the debt ceiling are numerous. Examples include the need to borrow to keep up with current expenses. A financial confrontation and meltdown could lead to chaos in the financial markets and derail the fragile recovery from blossoming into a full scale uptick in the world economy. The population has grown from 300 million to 315 million. A growing population will mean greater needs for infrastructure and public spending. Taxes were raised in the early 1990s despite the fact that the recession then was shallower and Operation Desert Storm was nowhere near the size of the Iraq War or the conflict in Afghanistan.
The arguments against raising the debt ceiling are to enforce spending discipline. The control over spending was basically lost soon after the commencement of the dual wars in Iraq and Afghanistan, as well as the Great Recession. The enforcement of spending discipline is essentially to remove ourselves from these conflicts so that the military budget can normalize over time. A growing economy will also reduce deficits as wage earners pay more taxes into the Treasury, instead of drawing unemployment and social safety net costs from the government.
The United States economy, as well as the other advanced economies and Europe are on an upward trajectory, with the US and China leading the way. Increased revenues, coupled with spending restraint should lead to a reduction of the debt as a percentage of GDP, as was the case at the close of the Clinton administration. The Obama administration and congress have raised taxes. This act, coupled with spending restraint, should make the deficits a smaller factor in the overall budget equation over time.
Article comments
— go to most recent comments1 - Glenn Contrarian
Dr. Maresca -
A closer look at the numbers shows that US total debt as a percent of GDP went down steadily from 382 percent in Sept. 2009 to 350 percent in Sept. 2012. What's happening is that even a slow growing economy is reducing total debt as a percentage of GDP.
Yes, that's ABSOLUTE PROOF that Obama's deliberately destroying the American economy because of his 'deep-seated hatred of white people'.
But refusal to raise the debt ceiling is not the same as 'spending discipline' - it's refusal to pay the bills we've already racked up. That, and if we fail to raise the debt limit, we'll almost certainly go back into a recession along with much of the rest of the developed world, and that will hurt our tax base and further degrade our ability to pay the bills we've already incurred.
So there is no good argument whatsoever for refusing to raise the debt limit - it's the metaphorical equivalent of shooting oneself in the foot.
2 - Baronius
Total debt really doesn't have anything to do with it, though. It's good to see that number dropping, but that has as much to do with the credit crunch as anything.
As for "paying the bills we've already racked up", we could do that without increasing the debt limit. We'd have to make some rough choices, but we could do it.
3 - Baronius
I'm also not sure why you chose 2005 for your debt and GDP/debt comparsion. Consider the following numbers from the OMB:
(yr) (change in fed debt/GDP)
1996 0.1
1997 -1.7
1998 -2.2
1999 -2.3
2000 -3.6
2001 -0.9
2002 2.4
2003 2.8
2004 1.4
2005 0.6
2006 0.4
2007 0.6
2008 5.1
2009 15.5
2010 9.0
2011 4.5
2012 6.1 (est)
The wars and recession of 2001 clearly have an effect, but the big story by far is the change of pace in 2008 forward.
4 - Glenn Contrarian
Baronius -
Note that the times of negative change in the GDP came during times of higher taxes.
And if we did not increase the debt limit, then we would default, repeat, default. We would not be able to pay our already-incurred obligations. It would be a matter of which bills that we owe, that we would choose not to pay...
...but in any case, it would be a default, which would result in the loss of our credit rating, which would increase the interest rates all the way from the Fed down to every small-town bank in America.
Do you not see how that would greatly harm the American economy? Do you not see how that might very well force us into another recession, and decrease our tax revenue, thereby increasing the deficit anyway? The key, Baronius, is to boost the growth of the American economy and cut needless spending (like a hundred billion or so from the DOD) until the point that our tax revenue overcomes our deficit just as it did in the 1990's - and we can't do any of that by going into default.
5 - clav
GAO: "The current structure of the federal budget is unsustainable."
Here's an interesting excerpt from the 2011/2012 edition of the federal government's GAO (General Accounting Office) report, Financial Audit: U.S. Government’s Fiscal Years 2012 and 2011 Consolidated Financial Statements, published earlier this week:
It can be found in the conclusions section of the report, on page 247; it's titled:
Long-Term Fiscal Challenges
Increased attention to risks that could affect the federal government’s financial condition is
made more important because of the nation’s longer-term fiscal challenges. The comprehensive
long-term fiscal projections presented in the unaudited Required Supplementary Information
section of the 2012 Financial Report show that, absent policy changes, the federal
government continues to face an unsustainable fiscal path. The oldest members of the babyboom
generation are already eligible for Social Security retirement benefits and for Medicare benefits. Under these projections, spending for the major health and retirement programs will increase in coming decades as more members of the baby-boom generation become eligible for benefits and the health care cost for each enrollee increases. Over the long term, the structural imbalance between spending and revenue will lead to continued growth of debt held by the public as a share of gross domestic product (GDP); this means the current structure of the federal budget is unsustainable. (Emphasis added)
6 - Glenn Contrarian
Clav -
Yes! That 'structural imbalance' was NOT there when we had a budget surplus...when taxes were higher and as a result we had higher tax revenue! But thanks to those who somehow think that low taxes are a sure way to prosperity (despite all the evidence to the contrary), that surplus went away. Out with the tax revenue, and in with the tax cuts!
That, sir, led to the imbalance.
It's as I've told you several times before - if you want to live in a first-world nation, you've got to be willing to pay the taxes that make it a first-world nation.
7 - clav
But thanks to those who somehow think that low taxes are a sure way to prosperity (despite all the evidence to the contrary)
There are none so blind as those who refuse to see, and you are one such, Glenn. You didn't even read the excerpt, much less the rest of the conclusion. The GAO, the government's OWN expert and impartial accounting office, lays the blame square on the spending; not the tax rates -- spending. The IRS could begin to tax every one of us at 100% of our income, and STILL the deficit would continue to mount -- THAT is the problem; NOT the tax rates; we are not only spending more than we do take in, we are spending more than we could take in.
No one, not even the inept and stupid United States government can spend more than they take in for very long, Glenn. Read the effing report: even the government itself is saying, "We can't keep this up any longer."
It's not rocket surgery.
PS Early in the report, the GAO confirms what I wrote more than three years ago in this article: the USPS, in full disarray, as it continues to piss its revenue and government subsidies away, is going broke.
8 - clav
Oh and Glenn:
I've gotten used to not living in a first world nation since I moved here a few decades ago, so i don't care; third world is fine with me.
9 - clav
Hey, Glenn, here's something else for you to chew on. This is copied from your comment #49, posted on August 30, 2009, in the thread of my article about the USPS to which I linked in comment #7, above:
So that's my prediction - when we're slogging through another election cycle in 2012, you and I will discuss how USPS returned to profitability in 2011...and perhaps even in 2010. You'll still bitterly claim how terrible the USPS is, but they'll still be making a profit.
Your crystal ball must have been real dirty that day, Glenn...
10 - troll
the problem isn't taxes or spending - it's production...an economy that runs on growth can't afford to run out
...and how robust an analytic tool is a gdp figure that incorporates financial products anyway - while toilet paper and paper towels are among mankind's great inventions Certificates of Ownership of tulips and MBS don't appear to be
11 - Baronius
No, we wouldn't default.
The government receives (I'm not looking this up so the numbers are going to be wrong) $2.4 trillion a year. The interest on the debt is no more than $500 billion. That's the only thing that we're obligated to pay. The President says that if we don't increase the debt limit, (a) seniors won't get their checks, (b) the military won't get paid, and (c) we'll default on our loans. None of that is true. The President could have the Treasury pay for all of those things and still have enough for weather satellites and food safety. The government currently pays out $3.5 trillion per year, so yes, we'd be shutting down a lot. The economic consequences would be enormous, and those all translate to personal consequences for millions of people. But it's false to say that we'd default.
12 - troll
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now you can provide them the maximal comfort that they deserve as they undertake this final act of social responsibility
no one need go through life wondering if all that could have been done for Mum and Da had been
*crib models available
13 - clav
Bwahahahahaha!!
14 - Dr Joseph S. Maresca
The Great Recession took a lot out of the economy and the Treasury itself. Taxes were just raised so that additional revenues can come in. Another dimension of the problem is huge waste throughout the government and even the private sector. America simply consumes too much and saves too little.
15 - Baronius
The increase in taxes will account for what, .5% of the deficit?
16 - clav
If that...
17 - Glenn Contrarian
Clav -
Sorry, but the excerpt clearly states that the problem is the IMBALANCE between spending and revenue. That much is quite clear. Seems to me that you can't see the distinction in the last phrase that you bolded, perhaps between thee and me, I'm not the only one who has a problem with reading comprehension.
And when it comes to the failure of my 'crystal ball' concerning the USPS, hey - I'm wrong sometimes...but I trust those who are sometimes wrong and admit it far more than those who are always right.
18 - Glenn Contrarian
And Clav -
I've gotten used to not living in a first world nation since I moved here a few decades ago, so i don't care; third world is fine with me.
If you really think that America's not a first-world nation, then you have a lot less experience with third-world nations than that with which I first credited you. Or perhaps you simply didn't learn the lessons those third world nations had to teach you.
BTW, that last sentence is not meant as any kind of insult - I've seen many times good men and women who were raised in America walking down the street in third-world nations, all the metaphorically looking at this or that tree, but never looking at the forest as a whole, at the whys or hows of its existence, much less at the lessons it had to teach.
If these Americans had a common flaw, it was in their lack of respect for those trapped in the cycle of poverty.
19 - Glenn Contrarian
Baronius -
No, we wouldn't default.
Well, then, we should fire all the economists of every stripe - liberal and conservative - including everyone at Moody's, Standard and Poor's, and every other credit-rating agency, and everybody at the GAO and the Fed who ALL say that we would default. We know we wouldn't default because Baronius says we wouldn't.
Sorry, Baronius, but when pretty much all the experts (regardless of political leaning) agree on something, it's time to listen. But then, conservatives don't want to believe in AGW either, regardless of what 98% of climatologists say....
20 - Igor
@7-clav: the USPS actually makes a profit every year, but in 2006 the Bush/republican congress saddled USPS with ponying up $75billion within 10 years to pre-fund the pension plan.
That might be a viable plan if it were applied to ALL companies in America, but it is not. Nobody pre-funds their pension plan, they all plan to pay pensions out of future revenues. Thus, the rightists burdened USPS with an unfair disadvantage WRT their competitors.
Don't people know about these things?
21 - Igor
@14-Joe: No, we need to save less and spend more. The USA is in a demand drought. Savings are dormant monies that just accrue rents to rentiers.
22 - Baronius
Investor's Business Daily
23 - Baronius
The Economist
24 - Baronius
Slate
25 - clav
Glenn, I grew up in a third world country; I know them as well as anybody else who was raised in one.
I know you don't like to hear this, but there's far more about your USA that is third world than first world these days, including a substantial portion of the population, and I'm not just talking about immigrants; most of the heavily rural southern states are pretty third world in the sense that the bulk of their populations don't even have the rights bestowed by the Bill of Rights -- you know that.
Think about it.
I'll admit that much of my negativity arises from a profound dislike of the gringo mindset, but there is nonetheless a pretty good case to be made that the US is headed downhill and the "leaders" are far more interested in one-upping each other and collecting their bribes than fixing things.