In The News Quiz November 1, 2021

Can America Go Bankrupt? Debt-Limit Politics

The United States is both a wealthy country and a debtor nation. Nearly a quarter-century has passed since the U.S. last balanced its budget, during the Clinton Administration. And prior to Clinton, dating back to the 1960s, the government annually spent more on programs, salaries, benefits like Medicare, and national defense than it took in via taxes and fees. When the federal government runs a deficit, it must issue debt—in the form of bonds, bought by investors, private companies, and foreign governments. And without action by Congress each year, the government would officially default on the debt it owes—sending the country into financial turmoil.

Back before World War I, the Treasury Department had to formally ask Congress every time the national government needed to issue bonds to finance its operations, a time-consuming process. Enter the debt-ceiling solution: Congress sets a cap (today, around $20.43 trillion) on how much the federal government is authorized to borrow to pay our national bills. For decades, raising this cap was routine, especially since deficits were run up by presidents/Congresses from both parties.

In recent years, however, Washington’s sharp polarization has led to fights over many once-routine matters, and the debt ceiling is no exception. The U.S. approached its debt limit at the end of July; with Congress unable to reach a compromise, Treasury Secretary Janet Yellen took a set of accounting steps that enabled bills to be paid for a few more weeks. Congress, after a high-drama showdown in September, provided a short-term respite until early December.

This week lawmakers are again skirmishing over the national debt, with many Republicans in Congress refusing to raise the debt ceiling in an attempt to paint the majority Democrats as fiscally irresponsible. Some Democrats are seeking a way past this impasse, either by shifting debt-ceiling decisions to Treasury or by making debt payment authorization automatic.

What do you think? Does leaving the debt-ceiling decision to Congress inevitably lead to cross-party fights, imperilling our national economy? If so, what do you see as a promising alternative? Or should Congress enforce more budget discipline on the White House, as our national debt swells toward $30 trillion—considerably larger than the entire U.S. economy produces in a year?

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. Partisan polarization fuels repeated debt-ceiling clashes in Washington. During the 1960s-70s, Congress often passed bills with cross-party majorities. What was a key characteristic of Congress in that period, helping explain the higher degree of party polarization today?

. Which prominent politician proposed a bill a decade ago that would have shifted debt-ceiling power to presidents rather than Congress?

. Annual federal deficits contribute new obligations to the overall national debt. In recent years, the federal budget deficit has been around $1 trillion annually. By how much did the annual shortfall grow during the COVID crisis year of 2020?

. What idea for reducing the national debt did President Obama consider while in office-and later call "wacky"?

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