Smaller Government & the Debt Ceiling Debate

With Reuters still reporting

Debt Ceiling Headline (10.15.13)

as of 11pm Eastern, October 15th, it seems the window of opportunity for posting relevant debt ceiling pieces remains open. So I will take full advantage. When the GOP dysfunction erupted and the government shut down in response on October 1st, the fight was ostensibly about Obamacare. A second-term president would dismantle part of his signature legislative achievement, and in return perhaps 40 opposition lawmakers would deign to allow the government to resume normal functioning. This seemed problematic, not because the Affordable Care Act is a quality piece of legislation (I would argue it is not), but because the Affordable Care Act had been voted into law and, in the main (save that problematic Medicaid expansion bit), upheld by the Supreme Court. At some point, even if you think the country is committing the legislative equivalent of seppuku, the rules of the game require that you admit defeat and allow the government to continue to operate.*

As the shutdown pressed on, the debt ceiling deadline of October 17th began to loom large, and the debate metastasized to include debt reduction. Suddenly, the government wasn’t going to reopen, and Treasury wasn’t going to borrow a dime more, unless we managed to pull off sweeping entitlement and tax reform. Or at least establish a blue ribbon commission to bluster about it (a process that really went places when we tried it before. Oh…wait), after which we would arrive at a few other artificially constructed fiscal cliff hangers (the Senate suggests January would be a good month for this), allowing us to play delightful games of governance chicken all over again.

So now, at least on the surface, the government is shut down and constrained in its ability to fund itself due to a debate about how large government should be, how much it should spend. This somehow seems more appropriate. But is it really?

The debt ceiling is silly. Lots of people with heaps of credibility agree. The silliest thing about it is:

One of the peculiar embarrassments of the American political process is the fact that Congress votes separately on the deficit and debt, as if they were two different decisions. This bizarre arrangement allows Congress the luxury of instructing the Treasury to spend more than it takes in as revenue while at the same time voting to deny the authority to borrow the funds that would be necessary to implement the plan.

If you are a legislator who has voted against all the spending which now needs a higher debt ceiling to be carried out, perhaps the set of circumstances described does not bother you. For you, personally, you’ve managed to avoid the awkward position of voting for spending  and then voting against the procedural mechanism that would allow it to happen. But executed as legislative policy, this is idiotic.

I’m actually fairly sympathetic to Republican calls for smaller government. From when my parents were born towards the end of the Baby Boom, to now, the government has been pretty good at growing. To be fair, as a percentage of the total population, Federal employment has actually shrunk, from about 3% in 1970 to roughly 1.8% in 2010.** But Federal spending on a per capita basis in 2013 dollars has almost tripled since 1960, going from just over $4,000 per person to a shade over $12,000 in 2010 (U.S. Census Bureau, OMB, BLS). This isn’t to presume that an objectively optimal measure of public spending can be located somewhere between those two figures, or even somewhere above the figure for 2010. But those figures do demonstrate how, if you are a legislator with a first principles preference for less, rather than more government, the last 50 years might look somewhat alarming.

But why on earth is the debt ceiling the tool you choose to try and arrest that growth? We know it does nothing to constrain future spending, and debt ceiling fights have never done anything to constrain future spending in the past, either. If the slowly ballooning budget of the U.S. Federal Government is an object of concern, fight tooth and nail against the passage of budgets that enshrine deficit spending; advocate loudly and intelligently for a long-term debt reduction plan (Simpson-Bowles, perhaps?). At the very least, do something that will make a difference in actually reducing spending. It’s logically perverse that passing a budget (something that could possibly influence debt reduction) became linked to repudiating an already passed healthcare law, while debt reduction became linked to raising the debt ceiling (something that could not influence actual debt reduction).

 

*Or do you? A question hopefully to be addressed in a future post here.

**The 2010 figure includes temporary census workers (U.S. Census Bureau, OPM).