Debt ceiling crisis is just a symptom of America’s dire fiscal recklessness

 
Matthew Feeney

US SENATE majority leader Harry Reid said on the floor of the Senate last month that “anarchists” had taken over the House of Representatives.


While of course nonsense, Reid highlighted the deeply partisan nature of fiscal debates in Washington DC since the 2010 elections. These saw Tea Party Republicans voted in on a platform of fiscal conservatism and animosity towards the President’s signature piece of legislation; the Affordable Care Act, or Obamacare. Ever since, budget disputes have been a regular occurrence.

Obamacare has only heightened divisions. Senator Ted Cruz, who spoke for over 21 hours in the Senate against the programme, personified Republican resistance. Since his marathon speech, the Senate and House have failed to agree on funding legislation, hence the partial shutdown.

But as entertaining as current negotiations may be, the shutdown is a distraction from the more important issue facing the US, the looming debt ceiling, which Treasury secretary Jack Lew says will be reached on 17 October. And the problem of US debt cannot be explained away as the result of partisanship. Neither party can claim the mantle of fiscal responsibility.

A shutdown occurs if Congress cannot fund non-essential services – why much of the federal government is still functioning. Compared to what may happen on 17 October, it’s an irritating political embarrassment. If the US were to breach the debt limit, the global financial consequences could be disastrous.


And whatever happens in the run up to the ceiling, we’re unlikely to see realistic proposals that would come close to addressing the situation; the US national debt-to-GDP ratio stood at about 75 per cent in 2012, compared to an average of 38 per cent in the 40 years before 2008. As of 2012, the government had also promised at least $55 trillion in unfunded future benefits. While the deficit has fallen, it is projected to rise again from 2016, as demographic trends drive spending.

Republicans portray themselves as committed fiscal conservatives, but most in the House have voted for the funding of national parks, museums, and the National Institutes of Health since the shutdown began. Any party that can overwhelming back such spending cannot claim to be a party of limited government, states rights, or privatisation, even if the votes were part of a strategy aimed at making the Democrats look bad. There is the added problem of Republican attachment to an unnecessarily vast defence budget, which further damages their limited government credentials.

Polling suggests that Republicans are now receiving more blame than Barack Obama or other Democrats for the current shutdown. If Republicans are not careful, they also risk being blamed for a possible default.

Obama, who as a senator in 2006 said that a vote on raising the debt limit signalled “leadership failure”, has argued that raising the debt ceiling is needed to pay for payments already incurred. While we must hope that default will be avoided, the fact that this sort of attitude towards the US’s fiscal situation has become normalised is a terrifying symptom of the US government’s inability to control spending.

Matthew Feeney is assistant editor at Reason 24/7.