Days Of Our Lives: Debt Ceiling Saga Renewed

Business man looking inquisitively with a ceiling made of money overhead.

It’s fitting that the soft deadline for Congress to raise the debt ceiling comes only a few days after Groundhog Day. But politics may take a back seat this time around.

CNN reported on January 31 that House Republicans will demand some sort of conditions for raising the debt ceiling before February 7. But Sylvia Mathews Burwell, the White House Budget Director, told Reuters that she believes both sides want to avoid the same messy negotiations that led to the federal government being shut down for 16-days this past October. She specifically pointed to the $1.1 trillion spending bill passed on January 16 with strong bi-partisan support that will fund the government until the end of September.

The one thing working in the government’s favor is that the Treasury has several tools that can extend the default date through the end of February. But that also opens the door for more political melodrama that Americans have grown tired of.

Political Theater Helps Nobody

Excessive debt doesn’t help the Doe family on Main Street, nor the U.S. Treasury. But some debt is considered “good debt.” The Doe’s know they must take on a $200,000 mortgage to maintain continuity for their family, while the federal government knows that raising the debt ceiling has been a compulsory obligation despite political differences.

President Ronald Reagan, often viewed as the standard-bearer for Republican ideals, raised the debt ceiling 18 times during his eight-year White House stay. George H.W. Bush raised it nine times, Clinton four and George W. Bush seven times. President Obama is seeking his seventh increase this month. The only president not to raise the debt ceiling since 1939, the first year federal debt limits were instituted, was Harry S. Truman, according to Politifact.

Mark Zandi, chief economist of economic forecasting and bank stress testing firm Moody’s Analytics, called the statutory debt limit an “idiosyncratic, anachronistic…destructive rule” in written testimony before the Congressional Joint Economic Committee last September. The company’s chief economist took it a step further, calling for the elimination of the statutory debt ceiling entirely due to the negative effects politics have on the overall economy.

Standard & Poor’s has repeatedly warned the federal government that failure to curtail spending and reduce the deficit will ultimately cost the U.S. its top credit rating.

Forget February 7

The soft deadline to raise the debt limit will inevitably come and go with no deal being made. Senate Minority Leader Mitch McConnell, R-KY, told Fox News that it would be “irresponsible” for Congress to allow another debt ceiling hike without attaching conditions to it. But House Speaker John Boehner, R-OH, was a bit more conciliatory. He said that despite the differences between Republicans and Democrats, Congress does not want to default again.

The total outstanding debt for the U.S. currently sits at $17.25 trillion.

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