The current debt-ceiling dramatics put politicians at center stage in a high-stakes drama, and provide onlookers with a mixture of amusement, disgust and sheer horror at the dismal spectacle of the nation’s credit standing held hostage to intractable disputes over taxes and spending. There has to be, one intuitively feels, a better way. And there is.
The idea is simple: Decouple debt service — payment of interest and principal due on the nation’s debt – from budgetary disputes.
What is pulling both sides towards the brink, despite near-unanimity on the necessity of avoiding a default caused by failure to pay interest and principal in full and on time, is that debt service is enmeshed in the long-running, highly emotional policy disputes on the budget. These disputes reflect deep-rooted philosophical differences between the two parties on the size of government, who pays for it and how powers are distributed between the federal and local governments. The only way to resolve these issues without risk of default is to separate the issue everyone agrees on — the need to responsibly service debt — from those that generate deep divisions in the body politic.
So how can we implement procedures to avoid the appalling spectacle of the world’s leading power seemingly unable to discharge its obligations in a timely, orderly manner?
Congress should pass a law mandating that the debt ceiling is automatically adjusted as necessary to permit full payment of interest and any principal currently due, without additional action by Congress or the president. Budget matters must be expressly denied inclusion in any automatic ceiling adjustment.
Voter cynicism with politics is fueled by these periodic political contests that amount to a high-stakes game of political chicken. Politicians are forced, for their part, to take bet-the-company risks, with consequences that are catastrophic for the country as a whole, and equally so for the political party that shoulders primary blame.
Budget matters should not be resolved now in a long-term deal. Neither the 2008 nor 2010 elections turned on budget priorities. President Obama campaigned on his broad theme of “hope and change you can believe in,” restoring economic growth and redistributing wealth. The GOP off-year sweep of 2010 turned on excessive spending and a poor economy, but off-year elections, as politics maven Jay Cost notes, do not confer full mandates. Only when a party takes the White House can it plausibly proclaim a mandate for major change.