Raise the debt limit now

Playing with the nation’s creditworthiness is a dangerous and unnecessary game; one that elected officials should not be playing at all.

And yet, once again, they find themselves just days away from having to default on at least a portion of our nation’s obligations. According to the most recent estimate from the Treasury Department, the government will run out of “extraordinary measures” to avoid breaching the current debt limit by Nov. 3.

{mosads}Before that happens, Congress and President Obama should lift or suspend the debt limit, either as part of a larger budget deal or as a stand-alone measure. The world should know that the United States is not a deadbeat.

Even the threat of default can cause damage. A July report by the Government Accountability Office (GAO) found that delay in raising the debt limit in 2013 increased the Treasury’s borrowing costs while decreasing the demand for some Treasury securities.

An earlier report by the GAO on the 2011 debt limit showdown found that it had increased government borrowing costs by $1.3 billion.

Longer delays in raising the debt limit, or an actual default, would lead to more severe consequences, as Treasury secretaries from both parties have warned.

Hank Paulson, who served as Treasury secretary in the George W. Bush administration, once observed that “failing to raise the debt ceiling would do irreparable harm to our credit standing, would undermine our ability to lead on global economic issues and would damage our economy.”

Current Treasury Secretary Jack Lew warns that “there is no way to predict the catastrophic damage that default would have on our economic and global financial
markets.”

The GAO has concluded: “To avoid serious disruptions to the Treasury market and to help inform the fiscal policy debate in a timely way, Congress should consider alternative approaches that better link decisions about the debt limit with decisions about spending and revenues at the time those decisions are made.”

This is good advice, and the GAO laid out some possible changes. In the meantime, however, we’re stuck with the debt limit mechanism we have.

Some members of Congress may be reluctant to vote for a debt limit increase because they promised constituents that they would never do it. Keeping campaign promises is generally a good thing, but there is a difference between campaign promises and public duty.

In the current situation, voting to raise the debt limit is an act of necessity, not fiscal irresponsibility. The debt in question has already been incurred by the spending and tax policies that have already been put in place.

The issue is not whether one agrees with those policies or has concerns with the mounting debt. The issue is the financial integrity of the U.S. government.

Members of Congress who oppose a debt limit increase would not think kindly of anyone who owed them money and refused to pay because they decided to be “fiscally responsible.”

When faced with a potential default, the first order of business is to pay the bills. There is no question that the government has the capacity to do this. The only question is its willingness, and there is no excuse for running up debt and then refusing to pay it.

Moreover, refusing to pay the bills would not make them go away. It would not cut spending. It would not raise taxes. It would not do anything to remedy the structural budget deficit that now exists.

The only way to prevent the debt from growing to alarming proportions is to change the policies that are producing it in the first place.

That is why the best immediate course of action would be for Congress and the president to negotiate a budget plan and raise the debt limit by enough to cover the costs of that plan.

In the absence of such an agreement, a “clean” debt limit increase or suspension should be enacted to avoid disruption in the market for Treasury securities and possible adverse economic consequences.

To be clear, the projected rise in the nation’s debt is a serious problem. After raising the limit, Congress and the president should promptly develop a comprehensive, specific and credible plan to place our nation on a sustainable fiscal path.

Lawmakers should consider the entire federal budget to be on the table. That includes entitlement programs, the sequester and the levels of domestic discretionary and defense spending, along with revenues.

Lawmakers should also follow the GAO’s advice and come up with a better, more rational way of dealing with the debt limit.

This is not a game. Our nation’s creditworthiness is a valuable asset. It must be protected in the national interest even as lawmakers differ over specific spending and tax policies.

Bixby is executive director of The Concord Coalition, a nonpartisan advocate of greater fiscal responsibility in Washington. See concordcoalition.org for additional information.