February 23, 2011

Debt ceiling will be raised, and then what?

Antony Davies

Senior Affiliated Scholar

When Congress returns to session next week, the debates on extending the debt ceiling won’t be far behind.  There is a zero percent chance that Congress will not raise the debt ceiling, as they’ve raised it more than 70 times over the past couple of decades. 

The more likely scenario is that the debt-ceiling ‘crisis’ will be used for political grandstanding. Hopefully, responsible politicians will use this opportunity to strong-arm the irresponsible ones into accepting spending controls with serious teeth.

There are things that legislators can ask for in exchange for raising the debt-ceiling that will move us toward fiscal solvency.

Congress needs to impose a spending limit on all future budgets. By exchanging the debt ceiling for a spending ceiling, we take tax hikes off the table and focus attention on the source of the deficit problem: spending.

After a budget is passed, all discretionary spending allocations should be reduced by the same percentage so that total budgeted spending does not exceed 19 percent of the previous year’s GDP.  This way, no single person has to take political heat for cutting specific programs since the cuts are automatic and across the board.