The budget, the deficit, and the debt ceiling

“Regular order” would have the 12 separate spending budgets separately debated and voted on. In recent decades both parties have found it easier to delay the process until urgency sets in. That’s when Congress creates a quickie budget with virtually no debate. I’m referring to the emergency omnibus spending bill passed in December.

We’ve had decades of omnibus spending bills strung together with emergency short-term continuing resolutions. We’re fast approaching an explosive conclusion for the current budget, the looming debt ceiling debate. This process is pure folly.

Carefully crafting our financial plans is important, but we don’t seem to have the time to do it. We devote little attention to budget details, and our spending ambitions typically sneak past our ability to create revenue. Ever-growing deficits and debt are inevitable.

The political parties engage in a simple but bitter argument about debt limits. Democratic legislators tend to give a wink and a nod to the debt ceiling and treat it as a separate, unnecessary, bothersome consideration. They don’t want it to be part of the budget debate, which diminishes the debt ceiling’s potential effectiveness as an important financial management tool. Republicans take the opposite position.

Constitutional Amendment 14 provides that “the validity of the debt of the United States … shall not be questioned.” Using that as a basis, Democrats argue the very existence of a debt ceiling is arguably unconstitutional and therefore void. They claim it interferes with the duty to pay debts.

However, the 14th Amendment also states that Congress has “the power to enforce by appropriate legislation, the provisions” of the amendment. The introduction of a debt ceiling by Congress was done precisely for the purpose of ensuring an orderly, thoughtful, and responsible budget and funding process. And if spending and borrowing decisions were made concurrently, while the process would be more difficult, the end product’s potential would be far superior.

The value of having a debt ceiling can also be defended as a matter of common sense. Financial decisions which impact each other and have overlapping considerations are best deliberated and approved concurrently. Financially successful public or private organizations, as well as individuals, follow that same comprehensive approach to financial planning. Publicly traded corporations, for example, couldn’t survive government scrutiny or economic realities unless they did likewise.

Ask any commercial loan officer: “Would you authorize a large credit line for a company without understanding the implication of its spending budget on its borrowing requirements?” The answer would be “never!” Only after the necessary borrowing requirements are approved, would the budget be considered a complete, dependable and achievable plan. We would be wise to apply similar rules to our government.

Our Founders set up a system of checks, balances, and deliberations to make sure the governance process would be thorough — even if excruciatingly so. The existence of a debt ceiling as a limiting consideration on borrowing and spending is a natural fit for our system.

Arguing that Congress doesn’t have to be influenced by debt and borrowing requirements when the budget is being debated and approved should create suspicions of poor financial discipline. Likewise, eliminating our debt ceiling would open the door to undisciplined spending. The presence of a debt limit can have an important influence on creating responsible spending habits.

The biggest cause of all this budget/debt angst is the fact that the two interrelated issues are being separately decided, often months apart. When a budget is passed, we should expect the necessary revenue and borrowing levels are also provided for and approved. If the system doesn’t mandate that, we should change the system.