Debt Ceiling Do-Si-Do

Last night, just as the political world was obsessing over "Weinergate" and the circus that is Sarah Palin's "family vacation," Washington DC engaged in another act of political theater: the House vote to raise the debt ceiling. The final act of this circus, however, unlike some of the more trivial stories that pass for "news," will determine the health of our nation's -- and the world's -- economy for years to come.

Back on May 16th, the United States hit its debt limit, and since then, the government has been forced to implement "extraordinary measures," to ensure that America remains solvent. These measures can not go on indefinitely, however, as they expire on August 2nd. The clock is ticking.

And how does Congress respond? By bringing up a bill that, by admission of its one of its own authors, Rep. David Camp, "will and must fail." Why introduce a bill with the intention of ensuring its failure, one might ask? The answer: to demonstrate to President Obama the lack of congressional support for raising the ceiling without enacting budget cuts to go along with it. But haven't we seen this saga play out before? Back in April, President Obama and Speaker Boehner agreed at the 11th hour to a compromise which cut $78 billion from the President's proposed budget. Given that the budget was passed by members of congress, it makes no sense that these very same people are now speaking out against the natural, and logical, outgrowth of their piece of legislation. In essence, the American economy is being held hostage by those in congress who, unsatisfied by the April cuts, want to squeeze more out of the federal budget.

And the American people are outraged, right? Wrong. As evidenced by a recent Gallup Poll from May 13, nearly half the US population is against raising the debt limit. Only 19% are in favor of increasing the ceiling, while 47% are against it. Straddling the middle, are the 34% of Americans who "don't know enough to say." At least they are being honest with themselves. For, if the 47% who are against raising the debt knew enough to form a rational opinion, they would either revise their answer or acknowledge that their wishes, if granted by congress, would result in economic calamity.

If Congress does not increase the limit by August 2nd, when the Treasury's "extraordinary measures" expire, Geithner and Obama will be forced to choose between two very dire options. They may decide to default on the national debt for the first time in our nation's history. This would result in skyrocketing interest rates, and could lead to a credit crunch which plunges the world into its second financial collapse in the past four years. Imagine someone who recently developed a mean case of acute asthma, who is barely recovering from the most strenuous asthma attack recorded in, say, 80 years. When he finally begins breathing again with deep, but wheezy breaths, he takes a harsh body-blow, knocking the wind out of him. How long will it take for him to recover, if ever, and at what cost? For the obvious reasons, this result is unthinkable.

In light of the consequences of default, we must turn to option 2. If the government wishes to honor its debts, it must drastically cut federal spending by $4 billion dollars a day, or roughly $125 billion every month. These billions can come out of anywhere from federal salaries, Social Security and Medicare payments, or soldiers' pay. Within 8 months, these cuts will have sapped a trillion dollars out of an economy that is already sputtering -- the equivalent of cutting off our asthmatic's air supply.

In realizing the dire consequences of not raising the limit, it is disheartening to see the political games that surround such an important vote. This may cause one to lament that our elected officials are more interested in dancing in a debt ceiling do-si-do, than actually engaging in governance. Looking back at the political history of our country, however, it is comforting to see that there was once a time when these partisan charades did not surround congress' vote on the debt ceiling. Congress' process of appropriating funds had always been a redundant two step process: passing the budget, and then authorizing an increase in the debt ceiling to allow the already agreed upon money to be spent. Between the years of 1979 and 1995, however, there was a brief respite from this strange, redundant system.

As chronicled in the National Journal's "This Guy Once Fixed the Debt Ceiling Problem," Congressman Richard Gephardt, under the tutelage of Speaker Tip O'Neill, combined the two votes back in 1979. When a budget was passed, the debt ceiling was automatically raised to accommodate the increase in appropriations. This system held strong until incoming House Speaker Newt Gingrich separated the two votes, when the Republic Revolution rolled through the House in 1995 . In the words of Gephardt, the two-vote system is "silly because it's just grandstanding...it's a facade; it's not real. If you're real, you vote for budgetary and spending decisions that would balance the budget"

Despite the obvious silliness of the two-vote system, it has remained intact for the past 16 years. And here we are, two months away from insolvency, because many of our politicians prefer to play games with our economy, dignifying the ignorance of some of their constituents, rather than engaging in responsible governance. Today, in response to last night's legislative charade, Geithner's Assistant Secretary for Financial Markets, Mary Miller, released a statement. In it she reaffirmed that, come August 2rd, the United States will face "catastrophic economic and market consequences" if Congress does not act. Let's hope congress gets the memo. Finally.