By David M. Walker
I have fought for fiscal responsibility and sustainability for more than 30 years. Unfortunately, our nation’s financial and fiscal outlook have deteriorated significantly during this period. In addition, the Treasury Department, Office of Management and Budget, Congressional Budget Office, Government Accountability Office, and the Federal Reserve have all stated that the federal government is on an imprudent and unsustainable fiscal path.
We now face another debt ceiling debate. The Treasury has again begun implementing extraordinary measures to avoid violating the limit. The limit is expected to be reached sometime between June and August.
Unfortunately, a lot of disinformation and misinformation is being promulgated regarding the debt ceiling. Only one remaining federal financial obligation is guaranteed by the 14th Amendment to the Constitution. Specifically, federal debt held by the public and various government “trust funds,” including related accrued interest. As a result, the federal government CANNOT default on Treasury securities.
Some have asserted that the federal government could not continue to pay Social Security benefits on time if the debt ceiling is reached. That is false. Based on the latest Social Security Trustees report, there are adequate bonds in its combined trust funds to pay full benefits until 2033. Since the Social Security bonds are included in the debt ceiling number, trust fund bonds could be converted to debt held by the public without increasing the total amount of debt subject to the debt ceiling.
If the extraordinary measures are exhausted, and the debt ceiling limit is reached, tough choices would have to be made, including imposing a government shutdown for all non-essential employees, delaying payments to government contractors, and cutting other federal spending. This needs to be avoided since it would impose hardships and additional long-term costs on the government and result in a loss of confidence in the federal government’s ability to manage its finances. This would likely result in a downgrading of the federal government’s credit rating, higher interest rates, a significant market correction, and a decline in the dollar’s value.
Now that the House has passed the Limit, Save, Grow Act, President Biden must sit down with the House speaker and bargain in good faith. The president’s stated position that the debt ceiling should be raised unconditionally is both unrealistic and inappropriate, given our current financial condition and fiscal outlook. I believe the debt ceiling should be repealed and replaced with a debt/gross domestic product approach to fiscal constraint.
While House Republicans and Biden’s current debt ceiling positions are not politically feasible, a ray of light recently emerged. Specifically, the bipartisan House Problem Solvers Caucus released a four-point framework for a debt ceiling deal. Their four points were: (1) Raise the Debt Ceiling until 12/31/23 or as long as 2/28/25 if the following steps are complied with; (2) Enact a Fiscal Sustainability Commission to engage the public and make a package of spending, tax and other recommendations to address our structural fiscal imbalance that would receive an up or down vote in Congress; (3) Return to Regular Order and adopt controls in the FY 2024 budget to stabilize the deficit in the near-term; and, (4) Require an annual GAO Fiscal State of the Nation Report and a mid-year annual budget report from the president.
The Problem Solver’s debt ceiling proposal seems reasonable and potentially feasible as a potential compromise to defuse our ticking debt ceiling time bomb. At the same time, additional steps are necessary to cut spending in the short term and provide a permanent solution to restore fiscal sanity and sustainability.
History has shown that the debt ceiling has failed to force fiscal responsibility, and other statutory budget controls (spending caps, pay-as-you-go rules) have failed to stand the test of time. Notably, the only way to bind current and future Congresses is by adopting a federal Fiscal Responsibility Constitutional Amendment. Such an amendment would reduce and stabilize debt/GDP at a reasonable and sustainable level.
House Budget Chairman Jodey Arrington, R-Texas, has introduced a resolution to spotlight the fact that enough states had filed applications for Congress to call a Convention of States to propose a Fiscal Responsibility Amendment as far back as 1979! Simply stated, Congress failed to discharge its express and ministerial responsibility under Article V to call such a Convention of States in 1979. Since then, federal debt has grown from less than $1 trillion to more than $31 trillion, and the value of the dollar has declined by more than 75 percent. A guaranteed vote on the House concurrent resolution could also be a condition to raising the debt ceiling.
It is time to resolve the debt ceiling debate, move the FY 2024 Budget and Appropriations bills promptly, and call a Convention of States to propose a Fiscal Responsibility Amendment if Congress will not present such an amendment on its own. If Congress fails to act, it is only a matter of time before the states will exercise their right under Article V of the Constitution to file a Mandamus case that would ultimately be decided by the Supreme Court.
David M. Walker is a former U.S. Comptroller General and a former public trustee for Social Security and Medicare. He wrote this for InsideSources.com.
