At Heritage, Sen. Pat Toomey, R-Pa., promises not to consider raising the debt ceiling until Congress reforms America’s “unsustainable” spending habits.
Toomey’s slim 13-line Full Faith and Credit Act pledges hearty restructuring of spending practices. As Sen. Toomey explained recently in the Wall Street Journal, the Full Faith and Credit Act removes the option of raising the debt ceiling until Congress reforms its spending habits.
Addressing the Heritage Foundation this morning, Toomey articulated America’s out-of-control spending as a problem so severe that it has already rendered economic recovery “subpar.” Tax hikes are a mere symptom of a spending plague so severe it poses an actual threat to national security. Toomey warned that at current spending levels we are hurtling towards a “catastrophic debt event,” a sudden economic collapse.
“If you think it’s impossible,” Toomey cautioned, “look at what happened last year in Greece.” Not only is a sudden economic collapse an actual and imminent threat, it is an inevitable consequence of unsustainable spending levels, even in stable democracies. Toomey suggested that a balanced budget amendment and statutory spending caps would represent steps in the right direction.
Debt levels in 2008 were remarkably similar to debt levels in 1988; we were spending more, but GDP kept up. In the last two years alone American debt levels have skyrocketed more than fifty percent over that sustained 2008 level, to 64% from 40%. When Greece collapsed its debt level was 110%; at our metastized borrowing rate and willingness to crank up the debt ceiling, catastrophic collapse ratios could be a mere two years away.
Not only are these unsustainable ratios crowding out private investment and adding huge debt servicing burdens to our current economy, but with an added commitment to expensive nationalized health are and boomers’ entrance into Social Security, our race towards catastrophic levels could prove closer than we think.
The Full Faith and Credit Act acknowledges that America will reach its $14.3 Trillion debt ceiling within the next few months. Toomey praised House Republicans’ determination to uphold their $100B spending cut promise.
Though Obama’s preemptive veto threat signals fierce resistance to budget cuts, the threat of catastrophic collapse supersedes partisanship, and Toomey sounded confident that spending reform would win the support of at least a few Senate Democrats.
Congress has raised the debt limit before. While not categorically opposed to debt limit hikes, Toomey calls it the “height of irresponsibility” to keep raising limits without reforming bad spending habits:
It’s like a family that spends too much, Toomey illustrated; the family constantly spends beyond its means, and they keep spending on credit cards, which is expensive, interest-laden spending! And when the family finally maxes out all of its credit cards, with much more going out than coming in — you don’t just give them another credit card; you ask them to restructure their spending patterns.
The American government is a family whose credit cards are all maxed out. Because the dollar has always enjoyed a place as favored currency, America is in a unique position with a little breathing room.
Now, while trade partners are still buying dollars, reform is relatively easy. With every credit hike we take, reform moves further out of reach. Now is the time, before it’s too late.