As the national debt approached $20 trillion last week, the staggering number called for the brakes. Instead, Washington stepped on the gas.
“For many years, people have been talking about getting rid of debt ceiling all together, and there are a lot of good reasons to do that,” President Trump announced last week. “So certainly, that’s something that will be discussed. We even discussed it at the meeting that we had yesterday. It complicates things, it’s really not necessary.”
Trump found it necessary to work with Democrats, as Congressional Republicans fumbled and stumbled in delivering on their health-reform promises, to reach an agreement on pushing up the debt ceiling. The new limit expires, supposedly, in December, but budgetary legerdemain may extend it for months.
According to the Washington Post, Congress has raised the debt ceiling 78 times since 1960. The Post did not note how many times Congress refused to raise the debt limit. But one imagines that Three Finger Brown could count them on his hand even if he lost that trio of digits.
As a brake, the debt ceiling certainly works better in theory than in practice. And the Trump administration has, until recently, proved better in practice than in theory on debts and deficits. The national debt declined in absolute terms by about $100 billion during the first six months of the administration.
But it did not take the administration a day to undo all that.
“At the close of business on Thursday, Sept. 7, according to the Daily Treasury Statement for Friday, the total debt of the federal government was $19,844,587,000,000 and the portion of it subject to the legal limit set by Congress was $19,808,747,000,” Terry Jeffrey writes at CNSNews.com. “After President Trump signed the legislation suspending the debt limit, the total debt immediately jumped to $20,162,177,000,000 and the portion of it subject to the limit jumped to $20,126,392,000,000…. That means the total debt jumped $317,590,000,000 on the day it officially topped $20 trillion for the first time and that the part of the debt subject to the legal limit jumped $317,645,000,000 on that day.”
One of Trump’s presidential predecessors might call that “fuzzy math.” The rest of us call ourselves confused.
Raising the debt ceiling directly resulted in a ballooning of debt (or at least a belated acknowledgment of existing debts). So, while the existence of the debt ceiling did little in practice to restrain big spenders in the past, its most recent expansion coincided with over $300 billion in more debt for the future to pay. It took more than 180 years for the republic to compile an annual deficit as large as last week’s one-day deficit.
Voices within the administration appear to appreciate that to Make America Great Again, the president must prod Congress to rein in spending to levels that approximate receipts.
“The failed economic policies of the previous administration resulted in a nearly doubling of the national debt-from $10.6 trillion in 2009 to nearly $20 trillion in 2016 and historically subpar economic growth,” Mick Mulvaney, director of the Office of Management and Budget, wrote House Speaker Paul Ryan earlier this summer in delivering the mid-session budget review. “Our Nation must make substantial changes to the policies and spending priorities of the previous administration if our citizens are to be safe and prosperous in the future.”
The debt limit, in theory, works to the benefit of budget hawks. Rather than cowering before the propaganda defeat that usually accompanies the mere threat of a government shutdown, budget-conscious congressmen could horse-trade votes to extend the limit for cuts in, or the elimination of, unnecessary programs. Since the debt limit only cuts off the government’s ability to borrow and not its capacity to take in revenues, crucial programs — Social Security, national defense, debt-servicing payments — need not suffer any adverse consequences.
Trump’s penchant for making the impossible possible, shown most dramatically in triumphing in an election one handicapper gave him a two percent chance of winning, gives him an opportunity to reorient, come December, the debt ceiling narrative, which, to this point, depicts running up the tab on the nation’s credit card as the responsible thing to do and limiting it as an act of recklessness. The president’s rhetorical abilities, and social media end-around on the press, shifted the conversation on immigration, trade, foreign intervention, and so much else. He could do something similar here given the political will.
One cannot drain the swamp without first shutting off its water supply. The debt-ceiling debate, even if Trump opted to avoid it in quickly extending the borrowing limits here, provides the president the opportunity to the means by which to force necessary cuts. It’s difficult to see him making America great again without addressing a $20 trillion and growing national debt.
Hunt Lawrence is a New York-based investor. Daniel Flynn is the author of five books.