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Nov. 30, 2021, 6:00 a.m. EST

Republicans should force Biden to spend less in coming debt-ceiling showdown

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By Peter Morici

As Congress returns from Thanksgiving fresh from carving turkeys, eating pumpkin pie and serving up polemics about the manifest blessings of America, it will be wrangling about raising the federal debt ceiling—again.

The federal government collects too little in taxes to pay its bills, and most months it issues new bonds as old ones come due to pay interest and for new deficit spending.

Social Security, Medicare, and other key programs on the line as Dec. 15 debt limit deadline nears

Democrats in Congress and pundits argue that they  helped raise the ceiling when the Republicans were in charge . The government is required to pay for programs and commitments already in place and if the ceiling is not raised, the  U.S. government will default, Social Security benefits won’t get paid , Democrats say.

The worst of that is demagoguery.

State of emergency

Under current law in fiscal year 2022, the  Congressional Budget Office estimates that the government will spend $5.5 trillion but only take in $4.4 trillion . Over the next decade, the annual increases in the debt held by the public will average $1.3 trillion.

If Congress does not act to raise the debt ceiling, the director of the Office of Management and Budget would have money—just not enough to cover everything.

The president could declare a state of emergency—and direct them to set priorities, for example according to those expenses deemed essential during the 2013 government shutdown.  

This could give priority to paying interest on the national debt, Social Security benefits, the salaries and essential procurement for the Army and Navy, and Medicaid and other benefits for mothers of young children and their offspring, while telling the states to suspend payments for working-age adults.

Federal law enforcement and prisons would need funding but the bureaucrats at the Federal Trade Commission and Justice Department antitrust and civil rights divisions could be furloughed—along with many other government agencies.

How pleasant it might be for local school boards, universities and state governments to not receive new mandates from the Education and Labor departments and the Environmental Protection Agency for the duration.

Funding could be suspended for regional agencies such as the  Appalachian Regional Commission , which seem to cultivate dependency on federal programs more than economic development. And for  National Public Radio , which is  endowed and richer than most private broadcasters  and cancels conservative voices.

Just another shutdown

Overall, it would look like a government shutdown from a failure to pass an appropriations bill, as occurred  during the Obama administration .

Republicans could challenge these actions in court; however, if successful they would bear the political burden of a default.

With interest on existing debt paid and federal spending forced into balance, the Treasury could issue new bonds /zigman2/quotes/211347052/realtime BX:TMUBMUSD30Y -0.91% to replace those coming due as it always does. Alternatively, the  Federal Reserve could buy up expiring debt and fund that by selling Treasurys on its balance sheet having maturities further out in time .

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Jan. 21, 2022 12:54a
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