The Reality of the Debt Ceiling
Senator Toomey discusses the consequences of raising the debt ceiling.
by Drew McKinley
Within its first few months, the newly sworn in Congress will have a decision to make that is just as symbolic as it is practicalshould the debt ceiling be raised from its current level of $14.3 billion dollars or should the cap stay in place? Many are making the claim that if the debt ceiling is not raised then the United States must default on its debt. However, as Senator Pat Toomey pointed out in the Wall Street Journal, this is not necessarily true. As long as the interest on U.S. debt is paid, the nation will not default.
With that in mind, what will happen if the debt ceiling is not raised? Currently, revenues only cover around 63% of federal spending. Rather than defaulting, keeping the debt ceiling in place would force our government to acknowledge that for decades they have been spending well beyond their means and take action to address this imbalance. In the event that the debt ceiling is not raised, the United States will still be able to pay about two-thirds of its current budget, leaving one-third of the budget that would have to be addressed.
When faced with the question of what should be cut, many politicians are likely to point to non-defense discretionary spending, the golden calf of would-be deficit hawks. Cutting only non-defense discretionary spending, however, is not going far enough, as it makes up only 19% of total spending. Even if all non-defense discretionary spending was eliminated, this leaves another $670 billion dollars to be cut to make a deficit neutral budget [according to CBO 1 , 2]. Yes, cuts would be significant and will require taking a look at defense and entitlements (as Paul Ryan has done) but failing to curb spending will only result in interest payments eating up more and more of the federal budget in future years.
The debate over raising the debt ceiling is a perfect opportunity to take a new look at government spending and decide which programs we need to reevaluate. The American people made it clear in November that they want their representatives to get serious about spending. Now is the time.