Explaining the Debt Limit
In January, the United States hit the $31.4 trillion statutory debt limit, but the Biden Administration has been able to continue borrowing and deficit-spending. With CBO’s latest projection of a $1.5 trillion deficit for the current fiscal year, we continue to spend nearly $125 billion on average more per month than we are collecting. The Treasury is doing this using accounting tools known as “extraordinary measures” which NPR and others have referred to as budget gimmicks.
With Treasury Secretary Janet Yellen recently announcing that our nation could exhaust the so-called extraordinary measures as early as June 1st, the media reports surrounding the ongoing debt debate have intensified. As a member of the House Budget Committee, I wanted to provide a detailed explanation of the status of the debt limit.
What is the debt limit?
The debt limit (also called the debt ceiling) has been a check on government spending since a version of the modern limit was first imposed in 1917. In Article 1, Section 8 of the Constitution, Congress is given the authority to “lay and collect Taxes, Duties, Imposts, and Excises, to pay the Debts and provide for the common Defense and the general Welfare of the United States.” Congress is therefore tasked with ensuring the United States government can operate with sufficient funding from various sources of revenue, borrow when necessary, and pay our debts. This responsibility is jeopardized by reckless spending that, if unchecked, will ultimately and inevitably lead to the inability to service our debt or borrow additional funds.
If it helps, you can think of the debt limit like it is our nation’s credit card limit. Sadly, rather than putting forward a plan to pay it off, politicians just keep making minimum payments and kicking the can down the road. Rather than making tough, but reasonable, choices to get our fiscal house in order, Washington elites are immorally piling on debt for our children and grandchildren.
Why do we keep hitting the debt limit?
Despite reports to the contrary, the federal treasury has taken in record levels of tax revenue as a result of the 2017 tax cuts. In fact, if spending were currently limited to pre-COVID levels, just four years ago, the budget would now be in balance. Instead, we are on pace for a $1.5 trillion deficit in the current fiscal year.
I know a trillion sounds like a big number. For reference, one million is a one followed by six zeroes. A trillion is a one followed by twelve zeroes, or equal to a million TIMES a million.
We can really boil it down to the simplest of terms: Washington continues to ask for an increase in borrowing authority because we have a bipartisan spending problem.
How does this impact you?
Economists warned President Biden, along with Congressional Democrats and Republicans, that the unprecedented spending spree over the past two years would drive inflation, and they were right. The government’s massive spending has helped push inflation to a 40-year high for everyday Americans, particularly for essentials like groceries, gasoline, housing, and utilities.
Today, as the national debt nears $32 trillion, every American citizen’s share nears $100,000. To make matters worse, if President Biden’s recently proposed record $7 trillion budget passed, the debt would increase by $16 trillion, or nearly 50 percent over the next decade and balloon to nearly $50 trillion. In other words, at the end of the next decade, the average family of four would owe $600,000 in federal debt.
What did House Republicans do about it?
As the world’s largest economy, we cannot continue recklessly borrowing and spending money that the nation simply does not have. As your representative in Congress, I believe it is my responsibility to ensure Congress balances the federal budget as soon as possible. The United States must begin to pay the debts that we have already incurred and stop the egregious spending that has placed future generations at risk. That is why I joined with 216 of my fellow Republicans in voting for the Limit, Save, Grow Act.
This plan does several key things:
It LIMITS the ability of politicians to spend your tax dollars by returning discretionary spending, or the budget line items Congress votes on every year, to Fiscal Year 2022 levels. That is the level of spending we were at just a few short months ago in December, and saves $131 billion in the next year. The legislation then caps the growth in future spending to just 1% per year, saving nearly $4 trillion over 10 years.
It SAVES taxpayers tens of billions more by reclaiming unspent COVID funds now that the public health emergency is over. The plan would stop hundreds of billions of dollars of green energy giveaways to corporations. The plan would prohibit the Biden Administration from moving forward with student loan transfers, which puts taxpayers on the hook for hundreds of billions of dollars for loans they did not borrow. The plan would also stop the planned $80 billion expansion of the IRS.
The bill would also GROW the economy by streamlining energy permitting. By producing more energy here at home, we can lower costs and make us energy independent again. And, the legislation would grow the economy by adding much-needed workers to the job market by requiring able-bodied welfare recipients without dependents to work at least 20 hours per week.
This proposal is a step in the right direction toward restoring fiscal responsibility. It also puts limits on federal bureaucrats and the regulatory state by implementing the REINS Act, which requires a congressional vote for all new major rules and regulations.
In total, the Limit, Save, Grow Act reduces overall spending by nearly $5 trillion over the next decade, in exchange for increasing the debt ceiling by $1.5 trillion. It is my hope that by slowing down runaway spending now, we can begin to navigate a path forward that will prevent us from having to raise the debt ceiling again.
What does this plan mean for Social Security, Medicare, and our Veterans?
Despite statements by the President to the contrary, the plan does not touch Social Security and Medicare benefits. These programs include commitments to the American people and we must continue to fund those benefits for our seniors who rely on them. At the same time, we must also acknowledge that the current operation of these programs is unsustainable over the long term. Reforms will be required to preserve and protect them for future retirees. Without intervention, the Social Security Trust Fund will be depleted in 2034, requiring massive tax increases or substantial reductions in benefits. We cannot allow that to happen. Congress must enact serious reforms and correct the flaws in these programs to avoid serious consequences for future beneficiaries.
The Biden Administration has also claimed that the Republican debt limit proposal will cut veterans spending by 22 percent. These claims have been refuted by the fact checkers at the Washington Post. Unfortunately, many Americans were distracted by these stories. The real story is that until very recently, President Biden publicly refused to consider or discuss any spending cuts or reforms with the debt limit since reaching it in January.
What is the current status of the debt limit debate in Washington?
The debt limit has been raised regularly since the 1970’s, usually accompanied by spending cuts or other reforms. You may remember 12 years ago, when Congressional Republicans entered into negotiations with the Obama Administration to cap federal spending in exchange for raising the debt limit. Those negotiations were led on behalf of the Obama Administration by then Vice President Joe Biden. And, when President Biden was in the Senate and President Reagan was in the White House, he also called for spending reforms to get our fiscal house in order.
Now, President Biden has taken a different approach to debt negotiations. Now, according to the Washington Post report on his recent Rose Garden remarks, President Biden has referred to our reasonable debt ceiling plan as “reckless hostage taking."
While President Biden has publicly stated he will not negotiate spending reforms as part of the debt limit discussion, he has finally agreed to meet with Speaker Kevin McCarthy. As these talks continue, I urge President Biden and Senate Democrats to acknowledge the gravity of our nation’s $32 trillion debt problem. The time has come for the Senate to pass, and the President to sign, the House-negotiated Limit, Save, Grow Act.
This Republican proposal is serious and responsible. Passing it into law will be a significant step toward placing our country back on a path to a balanced budget and ending the mortgaging of our future.