Now that the fiscal cliff has been avoided, Congress is lurching toward the next self-created and totally unnecessary fiscal crisis.
There is no good reason for the country to fail to pay its debts, and Republican leaders in Washington could do the country a favor and announce that they will not take another opportunity to hold a fragile economy hostage.
Unfortunately, that is not the plan. On Sunday morning talk shows this week, Senate Minority Leader Mitch McConnell said he would demand a “ransom” of cuts to entitlement programs before permitting what had always been a routine extension of the debt limit. This was the same strategy Republicans used in 2011, which did not result in deficit reduction, but did create so much uncertainty that a bond agency dropped the country’s credit rating.
On “Meet the Press,” Maine’s new independent senator, Angus King, succinctly explained why refusing to lift the debt ceiling is such poor public policy. Congress is not being asked to give permission for future borrowing, but for the authorization to borrow to fund programs that Congress itself has already approved.
Refusing to raise the debt limit would be like an individual buying things with his credit card and then refusing to pay the bill, King said.
That’s not fiscal responsibility, it’s fraud.
McConnell was most likely staking out a position for the upcoming debt ceiling showdown, and he does not really plan to push the country into default. But while that might give him more leverage in negotiations, it could also create enough uncertainty to slow down an already too slow economy.
President Obama has a few doomsday options of his own. He could claim under the 14th Amendment — which declared at the end of the Civil War that “The validity of the public debt of the United States … shall not be questioned” — that he has the authority to extend the debt limit without Congress. Or, some argue, he could mint a single platinum coin in the denomination of $1 trillion that could be deposited in the Federal Reserve.
Either of these options could prevent a default, but set off a political crisis at the same time that could be just as destructive.
The most fiscally responsible act would be for Republicans to take the debt ceiling off the table and proceed with negotiations for bipartisan tax reform and deficit reduction.
Inventing artificial crises to force action is not good for the economy and no way to govern. Congress should do the right thing and take the debt ceiling issue off the table.