Spring is here, the first quarter is over, and the federal debt limit is back in play. Again.
The cap was last raised in December 2021 by $2.5 trillion, to $31.4 trillion.
The national debt stands at $31.5 trillion. If you think that’s enough you’d be wrong since the intent is to increase the limit still further to avoid default. In the meantime, as has occurred in the past, the Treasury Department prioritizes spending with a series of “extraordinary measures” to keep things flowing with the taxes and fees flooding in, which in a normal world would already be more than adequate to maintain surplus.
The federal debt is now greater than our GDP ($23 trillion), and several times the level of 2023 federal discretionary, entitlement, and interest spending, which, as the Congressional Budget Office (CBO) reported in January, stood at $6.272 trillion. CBO projects spending to pass $7 trillion in 2026 and to reach almost $10 trillion by 2033.
The 2023 deficit topped $1.375 trillion; that’s an amount greater than the entire nominal federal budget was before the early 1990s.
Biden contests nothing, since his new fiscal 2024 budget proposes spending $6.8 trillion on all the legacy stuff plus an array of top-down industrial-policy and social engineering projects. Even as he claims responsibility for the largest deficit reductions in history, Biden’s new budget proposal unashamedly leaves behind deficit droppings of $1.8 trillion despite the debt situation.
That’s the House of Mirrors we live in. Republicans are at least rejecting Biden’s “clean” debt limit increases and calling for spending cuts. Not that their presence is all that apparent in 2023, spending cuts and budgetary controls have a long history of being combined with debt limit increases, as the Republican Study Committee’s (RSC) January Debt Limit Playbook notes.
The RSC’s proposals for negotiation with Biden include discretionary spending cuts; annual limitations on spending increases accompanied with offsetting recissions; pegging debt to a percentage of the economy; energy policy reforms on capacity and permitting; and the typical foray at duplication and “waste, fraud and abuse.” (Heads up; while necessary, the latter didn’t work even under Trump) Most interesting is the substantial attention RSC is paying to the pivotal role of regulatory reform in the broader government streamlining effort.
As it stands, Joe Biden and House Majority Leader Kevin McCarthy (R-California) are butting heads, with House Republicans now saying they may pass their own debt limit bill in the wake of McCarthy’s letter to Biden proposing discretionary spending restraint, work requirements for aid programs, and reclaiming unspent COVID money. McCarthy might get a few Democratic votes on such a move, but the Senate and Biden himself are in control here.
Here are a a few observations that ought to influence debt limit deliberations:
- One, for some, $31 trillion is plenty debt, and far more of the focus should be entirely on spending cuts, including entittlement reform—particularly for the unborn who could have other options besides Social Security and Medicare enrollment if we did not bind them ahead of time;
- Two, the debt limit is among the few remaining governmental institutional constraints capable of shrinking the size of government. That bears serious consideration;
- Three, there are vast unfunded liabilities far greater than the acknowledged debt that ought to drive urgency or spending reforms. Yet Biden and much of the GOP talk of not allowing entitlement cuts;
- Four, today’s toxic spending on infrastructure and “investment” is highly regulatory in nature in and of itself, and increasingly crowds out ever more private activity;
- Regulatory reform is underappreciated, and can play a pivotal role in getting government heft under control, which in turn can ease spending and boost economic health.
Read the entire article on Forbes.