Federal Debt Spiral
The administration held a grand signing ceremony last Wednesday to celebrate the tax cut bill, a marginally worthwhile piece of legislation that does reduce income taxes slightly. The East Room of the White House was awash with cabinet members, Congressmen, Senators, administration staffers, supporters, and news media of every kind, all gathered for a perfect political photo-op.
One day earlier, however, the President signed another bill into law without fanfare of any kind. There was no press conference, no cameras, and no ceremony whatsoever. In fact, the White House issued only the briefest comment on this particular bill, even though it affects the American people far more than the modest tax cut bill. The reason for the silence? The President had just approved a whopping $984 billion increase in the national debt, the single-largest increase in our nationís history. This was hardly a proud moment for the President or Congress, so the White House understandably kept the whole matter very quiet.
For perspective, this latest debt limit increase of nearly one trillion dollars is as large as the entire federal budget in 1985. The embarrassing increase was necessary because federal law limits the amount of debt the Treasury can carry, and the current $6.4 trillion limit had been reached. The federal government across the board has been spending money feverishly, at levels approximately 22% higher than just three years ago. This spending spree caused Congress to raise the debt limit from $5.9 trillion only six months ago, but the new limit was quickly reached.
Debt simply has lost any remnant of stigma in Washington. The point of the debt limit law was to shine a public light on government borrowing and make lawmakers more accountable for deficit spending. The original intent behind the law- to limit borrowing- has been abandoned. Today Congress can raise the debt limit at any time with virtually no media attention. More importantly, there is no political fallout. This puts Congress in the position of a spendthrift debtor who can authorize spending limit increases on its own credit card!
The House managed to avoid a direct vote on raising the debt limit, instead burying a series of automatic debt increases in the terrible 2004 budget passed in April. The Senate, by contrast, at least held an up-or-down vote on the issue. Yet only one Republican Senator voted against saddling the American people with nearly another trillion dollars of debt. Both parties in Congress clearly now view the debt ceiling law as purely symbolic at best. Privately, most members probably view it as an unnecessary obstacle that should be eliminated, an opinion shared by Federal Reserve Chairman Greenspan.
After adjusting for the new debt limit, our national debt jumped $107 billion last week. It has risen $538 billion in the last year alone.
The spending problem is deeply rooted in Washington bureaucratic culture, and no administration is immune. The President can set the tone for fiscal restraint or fiscal indulgence, but ultimately Congress controls the purse strings though the appropriations process. One thing the President can do, however, is refuse to sign spending bills or debt limit increases. When neither Congress nor the administration is capable of fiscal self-control, the taxpayer is always the loser. How do you feel knowing the federal government just wrote itself a trillion dollar loan using your labor as collateral?