Overcoming a Low Ceiling on Leadership

“The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure.”  So spoke then-Senator Obama on the Senate floor in 2006, expressing his opposition to raising the debt ceiling to a new limit of $8.9 trillion.

Consider the magnitude of leadership failure it took to bring us to the point of surpassing the current debt ceiling of $14.3 trillion — an alarming escalation from the $10.6 trillion national debt owed on Inauguration Day 2009.  The 2010 election was a repudiation of that failure, but it carried for the new Republican leadership in the House the sobering reminder that leaders of both parties had fallen short in their fiscal stewardship of the country for many years.  This time, it would have to be different.  Far from considering debt an esoteric phenomenon that does not affect them, people are acutely aware that the national debt has a tangible impact on their future — adversely affecting basic life decisions like buying a house or car or sending a child to college.  Chronic budget deficits and the debt they incur increase interest rates as well as taxes, and they diminish job creation.

Since Congress first created aggregate limits on public debt in 1939, it has raised the ceiling dozens of times — voting to do so whenever the issue came up — which suggests that the ceiling is ineffective by itself.  In the present debate, however, it has become at least a catalyst for public discussion of the fiscal recklessness that is endangering our future.  That discussion has occurred despite, not because of, the White House, which in February proposed a budget so off balance — it would have raised the debt to nearly $21 trillion in 10 years — that the Senate voted it down 97 to 0.  In April, the President sought a “clean” debt-ceiling increase, meaning he wanted the increase to be accompanied by no cuts or spending reforms.  That proposal was voted down in the House of Representatives by a margin of 318 to 97, with Rep. Carolyn McCarthy the only member of Long Island delegation voting for it.  By the time of his July 15 press conference, the President pulled an about-face, calling a clean increase “the least attractive option,” and he blamed Congress for “run[ning] up the credit card.”  Yet in contrast to congressional Republicans, who have come up with a few proposals (of varying quality) to deal with the debt, the President has offered no plan — ignoring even the bipartisan commission he established last year to explore the issue.  Rep. McCarthy, for her part, has played no visible role in the debate other than to join 69 of the most Liberal Democrats in the House in signing a letter to the President resisting cuts and criticizing a proposal to index Social Security to price inflation — an idea with bipartisan support that would go a long way toward saving that program.

As of this writing, no deal has yet been reached regarding the debt ceiling, and with time running short to meet the deadline (however arguable) announced by the Treasury Department to meet our obligations in full, little more than a small-scale, short-term resolution is expected.  Even if the debt ceiling were not an issue, our country would not be out of the woods.  Over two years, unified Democratic control in Washington raised spending, which had averaged around 20 percent of GDP after World War II, to nearly 25 percent.  National debt as a percentage of GDP jumped from 40 percent in 2008 to 62 percent this year.  These numbers more closely resemble Europe than the pro-growth, market sensitive dynamic that has characterized the United States.  On the current trajectory, our debt will soar to levels that have brought fiscal ruin to other countries.  With or without a debt ceiling, the U.S. faces the risk of a diminished credit rating and a reprise of the jobless inflation it faced during the 1970’s.

As we face the 2012 elections, we should strive not simply for spending cuts, but for structural reform of a budget process that is broken.  That includes capping federal spending or debt at a ratio of GDP and setting the path to a balanced budget.  With regulatory reform that includes both Congress and the top levels of the executive branch, spending cuts would be better chosen and more effective.  Increased congressional oversight, accountability for senior agency officials, and revision of the 1974 Congressional Budget and Impoundment Control Act to increase presidential discretion to curb wasteful spending should be accompanied by both congressional and presidential approval of any agency regulations that incur substantial costs (over $100 million under one proposed bill) on the economy.  Congress also must employ the tools at its disposal to explore and fix our system of entitlements, which faces irreparable damage if we do not act soon.

Needed change also includes tax reform, with a simpler tax code and lower rates facilitated by closing loopholes.  In the wake of Obamacare, which includes the largest tax increases since 1993, we should resist the temptation to increase taxes — a mistake that has compounded the problems of other economically afflicted nations seeking solutions.  The debt ceiling debate may prove valuable after all if it motivates elected officials to push for real reform.

Frank Scaturro is a former Counsel for the Constitution on the Senate Judiciary Committee and Republican candidate for the United States House of Representatives in New York’s 4^th Congressional District.