What we settled on isn’t a quick or perfect fix, but it’s a necessary one. The good news is it won’t raise taxes.
Unfortunately, given the state of our federal budget and our debt of more than $14 trillion, there was no easy way to address the need to increase the debt ceiling. What it boiled down to was this: We had to borrow money to pay the bills for things the federal government had already bought.
In the past, increasing our nation’s debt limit has been a rather simple exercise. It has been so easy, in fact, that Congress has increased it seven times since March 2006 – when our federal debt totaled about $8.3 trillion. In the five years since, our debt has increased by some $6 trillion – and our annual deficits are routinely in excess of $1 trillion.
Figuring out how to cope with that proved difficult and divisive.
President Obama and Treasury Secretary Tim Geithner had each claimed that if the debt ceiling was not raised by Aug. 2, the United States would default on its obligations. That wasn’t quite correct. Even if the debt ceiling hadn’t been raised, the government takes in enough revenues for about two-thirds of scheduled federal payments. We could have limped along, making interest payments on the debt and paying for other priorities – such as Social Security and Medicare benefits plus the salaries of members of our armed services. But, we wouldn’t have had enough money left to pay for the FBI, the Transportation Security Administration that safeguards our airports and other modes of transit, or myriad other federal programs upon which people rely every day.
Failure to increase the debt ceiling also could have worsened our weak economy. Many said that a failure to approve an increase would have caused our credit rating to be downgraded and prompted precipitous drops in the financial markets. The president even argued it could have led to a depression.
In response to the call to increase the debt ceiling, the House of Representatives passed three separate bills. Although each was similar, the first two were rejected by President Obama and the Senate. But on July 31, a Sunday night, Democrat and Republican leaders agreed on a package of changes. A final version was approved the next day by the House and on Aug. 2 by the Senate.
For the first time, an increase in the debt limit has been tied to a decrease in government spending. Under the bill signed into law by the president, federal spending will be cut immediately and capped in each of the next 10 years.
A special committee tasked with finding an additional $1.2 trillion in cuts was established. And, the bill requires that both the House and Senate vote on a balanced-budget amendment to the Constitution.
I wish the agreement required cutting more spending, and that all future debt-ceiling increases had to be conditional on Congress passing a balanced-budget amendment and sending it to the states for ratification. But, in the final analysis, the Budget Control Act was a step in the right direction. And it likely prevented serious economic harm to businesses and families.
Jean Schmidt is the U.S. Congresswoman serving Ohio’s Second District.