Broadsides to the global economy have myriad causes, not all within the control of governments. But when global economic pain is caused not by a devastating worldwide pandemic but by political pettiness and irresponsible governance, it’s infuriating.
Last week, Treasury Secretary Janet Yellen warned that America is poised to default on its $31.4 trillion debt by June 1. The impasse between President Joe Biden and Republican House Speaker Kevin McCarthy over raising the debt ceiling has perched the country, as well as the rest of the world, on the edge of economic disaster.
The stakes couldn’t be higher. A U.S. default on its debt would send global markets into a tailspin. The nation’s economy could tumble into a 2008-like recession, and as many as 7 million U.S. jobs could be lost — particularly if the debt limit crisis becomes prolonged.
This isn’t some sudden, unforeseen crisis. Warnings about a debt default and its ramifications emerged in January. Biden and Republicans had ample time to avert an emergency, though we’re not surprised at all that neither side deigned to consider what the fallout would be for everyday Americans. In Washington, political agendas come first, brinkmanship is a go-to bludgeon, and compromise is a dirty word.
Biden had been resisting GOP calls for him to meet with McCarthy, and was adamantly opposed to the Republican bill in the House that raised the debt ceiling by $1.5 trillion through the 2024 election and staved off default, in exchange for $130 billion in spending cuts. But last week Biden wisely relented, and agreed to a sit-down on Tuesday with McCarthy.
There’s no doubt that the debt ceiling should be raised to avert a financial crisis of potentially epic proportions. But Biden and his fellow Democrats must come around to the reality that ceaseless spending and borrowing only sets the stage for more ominous, damaging crises in the future.
The nation has endured 10 standoffs over the debt ceiling in the last 13 years. For the most part, the same pattern persisted — Republicans pushed for spending cuts that would shave down the national debt, while Democrats bitterly fought to defend their addiction to gluttonous, inflation-friendly spending. Each time, the country edged toward default before both sides hammered out a deal.
At times, the threat of sequestration — across-the-board cuts in certain kinds of federal spending — nudged both sides to compromise. In the past, we have liked sequestration as an incentive for Washington to make more sensible, responsible budgeting decisions — the kind that keep America far from the fiscal cliff.
Perhaps that threat needs to hover over the White House and Washington Democrats again. They might think twice about gleefully spending revenue that the Treasury doesn’t have, if they saw the sequestration blade coming down hard on their legislative agendas.
It shouldn’t have to come to that, however. While we do not believe that Republicans should weaponize the debt limit to get what they want, we also urge Democrats to see the folly of recklessly overspending the country into insolvency. The alternative is to relive this exercise in brinkmanship over and over, and watch the national debt balloon to new, far more perilous heights. That weakens America, and in doing so, imperils the global economy.
In the short term, we hope Biden’s talks with McCarthy resolve the crisis at hand. In the long term, however, the goal must be to embrace fiscal common sense, though we fully realize that up until now Washington has only shown the capacity to do the exact opposite.
Perhaps it’s time to resurrect the prospect of a constitutional amendment that would require the federal budget to be balanced. A debate about the measure became serious enough in 1994 to get passed in the U.S. House, though in the Senate it fell short of the needed two-thirds majority by a single vote. If Congress ever showed enough backbone to push through a balanced budget amendment, it still would need ratification by at least 38 states.
It’s a desperate measure, yes. But Washington’s fiscal irresponsibility year after year, administration after administration, warrants talk of strong remedies. Not since the administration of Bill Clinton has the nation seen a federal budget surplus. In fact, Clinton’s final four budgets were balanced and carried surpluses.
It may now seem like balanced budgets are a pipe dream, but they shouldn’t be. There’s precedent for their existence. A balanced budget necessitates making tough choices, and embracing the discipline to spend only as much as the government’s income allows. If Washington finds itself incapable of doing so, then maybe it’s time for America to turn to a balanced budget amendment as its best recourse.
— Chicago Tribune via TNS
