This week Congress agreed to a deal to avoid economic self-destruction. President Barack Obama signed the deal within minutes of reaching the debt ceiling. Unfortunately, this deal did not include any measures to prevent Congress from imposing a self-inflicted wound yet again; it was simply a short term fix that punted the problem down the road until January. The debt-ceiling fight wasn’t even pushed back until after the midterm elections. Meeting the debt ceiling would have been unprecedented and dangerous. Because Congress has toyed with the dangerous notion of not raising the debt ceiling, the power to raise it should be unilaterally placed in the president’s power.
No one quite knows how reaching the debt cap set by the debt ceiling would play out. Statutory law would place the executive branch in an odd position in which it would be legally obligated to pay congressional outlays, but it would be illegal to do so. It is possible the president could simply ignore the debt ceiling and go about business as usual. It is also possible that reaching the debt ceiling would force government spending to end and wreak unimaginable havoc on the economy. Some feel that the most likely outcome is that the treasury would be able to prioritize payments, meaning it would have to cut spending by 32 percent. This would likely impact a wide variety of government services including FEMA, veterans benefits, the FBI and federal courts. A 32 percent reduction in government spending would reduce GDP by 5.4 percent. To put this number into perspective, GDP fell 3.4 percent over the great recession.
A self-inflicted 5 percent reduction in GDP would be unfathomably irresponsible. Unemployment would spike, the stock market would crash, and we would immediately find ourselves in the midst of another deep and painful recession. Because this Congress has proven that legislators can be immature enough to threaten self-inflicted recessions for political reasons, the ability to do so should be taken away from them.
If the United States does not honor its full faith and credit, it would lose some credibility that it could never gain back. After the funny business that has surrounded raising the debt ceiling over the past two years, it is reasonable to be somewhat skeptical of once safe investments in the US government. This skepticism may cause an increase in interest rates on the national debt. Moody’s Analytic Corporation punished Congress’ incompetence by lowering the U.S.’ credit rating after the first time raising the debt ceiling became an uncertainty in the summer of 2012. If Congress continues to play games with the economy, we will lose credibility and pay for our errors. The unilateral power to raise the debt ceiling should be invested in the president. Congress is slow by design. Congress members are elected to serve their district and are accountable only to their constituents. The president is accountable to the entire country and would be held responsible for such debauchery. This would not be an expansion of executive power. For most of our American history, votes on the debt ceiling have been a mere formality. Raising the debt ceiling doesn’t authorize any new spending, it merely allows us to spend what has already been budgeted and allows the government to uphold the obligation it already has. Because Congress has proven its institutional flaws are too great to handle, the responsibility of raising the debt ceiling, the power should be vested solely in the executive branch.
We cannot have this fight again come January. It has already damaged our economy. Our credit rating was lowered the first time we had this fight. Between Sept. 18 and Oct. 16 the stock market was vulnerable due to uncertainty in Washington. The prospect of a self-inflicted recession is stupid and we should not do this to ourselves again. In order to avoid future uncertainty, the power to raise the debt ceiling should be taken out of the hands of congress and given to the president.
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