Politics: They called that a deal?

If you aren’t a political nerd, you might not be aware of the “impending crisis” called the debt ceiling. There is a lot of rhetoric and a lot of bullshit. I have an amateur’s take on it.

The history of the ceiling:

The “debt ceiling” was created in 1917 with the Second Liberty Bond Act. This took us from a system where Congress had to pass/approve EVERY LOAN to allowing the Treasury department (and therefor the President) to borrow as much money as they wanted as long as it fell under the debt ceiling (hence the name). In 1917 this meant putting out as many war bonds as the president needed to deal with World War I. Instead of congress having to sign off on literally every bond that went out, this meant the Treasury could borrow from Sam Everyman x1000 without getting 1000 approvals – allowing for smaller loans from individuals instead of just big loans with lots of strings.

So what happened?

Well, this is where I wish I had a better education on late-twentieth century politics. The commentary (rather than well sourced research papers) lead me to believe there is a combination of things that turned this into some kind of FIGHT. Forbes has a pretty good graph showing income rates through the twentieth century:

Taxing the Rich: The Evolution of America’s Marginal Income Tax [1]

In case you can’t remember -1929 is when people literally jumped out windows on Wall Street because the mass speculation BROKE our economy. Look where the tax rate was then? Look where it was between 1930-1970 when we did things like:

  • Like all of FDR’s building stuff (the successful and the failures!)
  • Fight 3+ wars with 100,000s drafted (WW2, Korea, and Vietnam plus a bunch of smaller conflicts)
  • Built the entire Interstate System
  • Built dozens of major airports, schools, museums, etc.

That’s just some of the big, extremely expensive things we did. Do you know how much debt we had in 1975 as a country? $533 Billion[2]. Sounds like a lot. But as of 2020, that debt is sitting at $27,748 Billion[2].

How did THAT happen?

So in order for the executive branch to do things like pay for a war in Afghanistan (or Iraq), or deal with recessions (1987, 1991, 1998, 2007, 2020(?)), or just…. pay government employees – we keep having to raise that ceiling. We just don’t have enough tax dollars coming in to cover the bills. Which is why there is a conversation (for the first real time since ~1980) about RAISING taxes again instead of cutting them – because you know this whole “we have shit to pay for and we need money” thing.

And in order to allow the treasury to borrow money, Congress has been steadily increasing the debt ceiling.

Ok. Not Quite STEADILY

The debt ceiling hasn’t had some kind of gradual slope of growth over the past 104 years. Number of times it’s stayed ok – but the amounts? WOW. So I was having trouble finding a visual for this one, so I tried my hand at it. Important Disclaimer: I’m an amateur and math is not my strongest skill. If I made mistakes, I promise they were probably from some kind of stupid error a real economist who can read these columns of numbers without getting a headache would not compute. So be gentle with me if I made errors. I think I’m at least inside the foul lines.

If you want some explanation of this chart, here goes. You can see from 1940 until 1980s the country’s debt and thus debt ceiling moved very little comparative to the changes after 1980. In 1940, the debt ceiling was $49B ($49,000,000,000). In 1980 it was raised to $925B ($925,000,000,000). That’s a big increase!! And yes, it really is. Those are both big numbers. But in the 40 years SINCE 1980, we raised it to $28.5T ($28,500,000,000,000). The first increase is about 19x, the second is over 30x. In the same time frame. THAT is concerning, we’re not only having to continue borrow more and more money, we are exponentially borrowing more.

Final Historical Point

And then there is an infuriating political-party-fighting some kind of bullshit that we keep hearing about “the debt cliff.” And there are some valid “both sides” arguments to be had, and there are some seriously bad faith partisan arguments that are making me crazy. This is where I really think the debt ceiling is causing problems rather than solving anything.

So let’s take a look. The government has had to shut down 9 times because of this ceiling. We literally couldn’t pay government workers. And never before 1980. Like seriously, I’m not making this date up as a transition point out of thin air. Things changed.

And the last 10 years or so, this fight has been ugly. Things changed again after 2010. And not for the better. The chart gets weird and I did my best to follow the mess. There are several “suspensions” of the debt ceiling where Treasury could continue to borrow while congress was fighting over the ceiling and then that debt got added in later (or something like that). I am going to admit I don’t understand those points. That is kind of what the deal is right now, but not exactly (I think?). Honestly, I run into a wall of confusing language, process, and just… it got weird and ugly!

The voting however? It’s worse. When Democrats are in power, they vote to pass it basically by themselves. In 2014, the Democrats are in power and they get 55 votes, 53 Democrats and 2 Independents. 45 Republicans vote against it. In contrast, in 2017, 45 out of 46 Democrats voted to increase the debt and so did 33 out the 52 Republicans. You know what changed? Naively, I want to say “No clue.”

Cynically, it’s obvious. Power and “winning.” When the democrats controlled the senate (2014), the GOP scream about the debt ceiling, the deficit, think of the cost we leave to the children. When the GOP is in power (2017), they talk about “bipartisanship” supporting the needs of the country. Guess who controls the senate now?

Ok…. and the ceiling stuff now?

THIS is why history is important. TODAY. NOW. Congress is having this fight AGAIN. Worse, McConnell is demanding that Democrats use Reconciliation because McConnell has promised that there will not be 10 GOP senators who will vote for it. Of the 33 who voted in 2017 YEA, 19 are still in the senate. They voted NAY in 2014, YEA in 2017 and now are right in line to vote NAY again. What changed for them? Why would they be willing to increase it in 2017 (after voting no 3 years earlier)?

Mitch McConnell isn’t even making it a secret – he is forcing the Democrats to use one of their reconciliation votes to deal with this. They only get a certain number (no idea why) and otherwise the filibuster means they (theoretically) need 60/100 votes to pass anything. I say theoretically because the GOP doesn’t have to filibuster. They could just vote no, or not vote or whatever. No, no, no – they promise they will filibuster (the BS that is the current “filibuster” would be a different blog post) everything.

Even worse, I would put dollars-to-donuts that the GOP will use “omg the Dems just keep raising this imaginary limit we made over 100 years ago and isn’t it awful” next year in the midterm elections so they can try to win back control of both the House and the Senate.

Personally, I think if the Democrats are going to do what the GOP wants (pass it using reconciliation to avoid getting filibustered- though the GOP could just not filibuster), they should go “Fine. We’re sick of this stupid fight. We aren’t going to pass some tiny incremental increase this time, since we aren’t going to let the government default on our debt, we’re going to pass a different kind of number. Something like $16T200.”

I literally don’t even know how many zeroes you would have to have to calculate that number anymore. You multiple 16T by 16T 200 times. It literally becomes a number that doesn’t mean anything anymore.

Then the Democrats can sit back knowing they will not have to have this fight again. Hopefully ever. If they don’t want to remove the ceiling through legislation (they could), this would make it essentially meaningless. We won’t default on our debt. The Democrats can also watch the GOP try to explain what happened to the voters. Firstly, I would love to see the bad math these politicians try to use (both sides for sure). Secondly, it would make this something that isn’t a fight anymore.

We can then move on to fights like election reform and security; dealing with immigration; ransomware attacks and responses; dealing with healthcare (again/more); climate crisis; and just maybe something like decreasing our debt. You know, fights that might move the needle and actually improve lives instead of fighting over this. Wasting weeks and months of time on raising the debt ceiling that they are going to raise anyway.