Debt ceiling votes in the United States Congress are an absurd ritual that should be relegated to the trash heap of history. If you charge expenses to a credit card, you don’t get to decide later that you’re not going to pay the monthly minimum due.
The Republican leadership treats the debt ceiling as a bargaining chip, holding the economy hostage with threats to default on the credit of the United States. No less than the Constitution declares the debts should never be questioned, making these political games unconstitutional.
Section Four of the Fourteenth Amendment clearly states, unambiguously, that the “validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
The words are clear: the debt shall not be questioned. We will pay our debts, a pledge made after the Civil War.
Republicans accurately claim government spending is a problem, as is our complex tax code and lack of tax law enforcement. Yet, the GOP has consistently added to the debt, added to the tax code, and cut Internal Revenue Service funding to audit higher-income earners and corporations.
How bad is the debt? It’s high enough that it has and will continue to influence interest rates. High national debts require the government borrow money. Treasury bonds compete for investment dollars against stocks and bonds issued by companies. The federal debt also competes against state and local governments. When the federal government must pay higher interest to attract investors, we all must pay more to borrow money.
The national debt is $31.5 TRILLION dollars. (https://www.usdebtclock.org) The national Gross Domestic Product (GDP) of the United States is $23 trillion, so the debt-to-GDP ration is greater than 120 percent. We owe more than the nation generates, and that’s dangerous.
As recently as 2000, the debt-to-GDP ratio was only 60% and it was a mere 35% in 1980, after declining from 53% in 1960.
Debt financing is not, in itself, a bad thing. Most individuals and families rely on debt financing for higher education, car purchases, and home loans. A wise family considers their debt-to-income ratio and attempts to minimize the debt servicing payments to a manageable level while still paying off debts within a reasonable time.
Cities borrow to build infrastructure. They issue municipal bonds and then service the debts based on tax revenues. Big projects cost a lot of money and there’s no easy way to pay the entire costs up front. Instead, most infrastructure projects are amortized over standard time periods. A water treatment plant might require 20 to 30 years of debt service, yet the need is indisputable.
The federal government must finance a lot of large projects. Those need to be financed. That’s quite acceptable and payments should be factored into a “balanced” budget that include debt servicing.
But, our federal debt isn’t for large projects with economic multiplier effects. Only a fraction of the federal budget goes to physical projects.
State, local, and federal debt obligations exceed $105,000 per citizen.
Total U.S. debt, combined private and public, towers at $94 trillion. That means our private and public debts represent 300% of GDP.
That much debt will, eventually, slow the economy be diverting money to debt servicing instead of products and services. Debt service only benefits the debt holder — it creates nothing new. Borrowed money must be paid back, eventually. Borrowing costs, in the form of interest rates, will rise as investors wonder if the nation and individuals might default.
The wealth of the richest Americans totals $5 trillion. That’s all the wealth of the 400 wealthiest and the top ten percent of households. All that money can’t get us out of this mess.
