The Most Terrifying Result of the Debt Ceiling Crisis

August 2, 2011 at 4:29 pm

The most terrifying result of the debt ceiling crisis is not the deal itself — with its tight discretionary caps, its special joint committee that Republicans already are saying they won’t allow to raise any revenues, and its potential for arbitrary across-the-board cuts. Instead, it’s the precedent that Republican congressional leaders say the crisis has established.

Senate Minority Leader Mitch McConnell declared on the Senate floor today that this “creates an entirely new template for raising the national debt limit.”  As he explained on CNBC last night, “In the future, any president, this one or another one, when they request us to raise the debt ceiling, it will not be clean anymore.”

In his Senate floor speech, McConnell noted that Washington will have to raise the debt limit again in early 2013.  He promised that he and others will seek to use that event once again to shrink “the size and scope of government.”

Ohio’s Rob Portman, one of the most influential Republican senators on budget issues, and Paul Ryan, the powerful House Budget Committee chair, clarified what Republican leaders have in mind, indicating that the new standard should be a dollar in spending cuts for every dollar that the debt ceiling is raised.  In a blog post today, Ryan argues that the agreement, “establish[es] a clear precedent that any future debt limit increases must be matched by an even larger cut in government spending.”

If maintained over a number of years, such a dollar-for-dollar standard ultimately would decimate much of the federal government.  Consider:

  • Under House Budget Committee Chairman Paul Ryan’s budget — which cuts non-security discretionary programs one-third by 2021 (relative to last year’s funding levels adjusted for inflation), slashes Medicaid by $1.4 trillion over ten years, cuts food stamps and Pell Grants by over $100 billion each, and cuts total spending by more than $4 trillion — the debt ceiling would still have to be raised more than $6 trillion over the coming decade above the increase enacted today.
  • In other words, applying a dollar-for-dollar standard to all future debt limit increases would require trillions of dollars in additional cuts on top of the massive cuts already in the Ryan budget — and make the Ryan budget look like a piker by comparison.

Policymakers who have engaged in recent months in high-stakes hostage-taking — threatening the economy and the full faith and credit of the U.S. government — apparently now feel vindicated, affirmed, and emboldened.  The lesson they draw is to threaten default each time Washington must raise the debt ceiling unless their demands for ever deeper budget cuts (with no revenue increases) are met.

The issue extends far beyond that of basic fiscal priorities, however huge that issue is.  Requiring a dollar-for-dollar match is not only unnecessary (and excessive) from an economic or fiscal policy standpoint, but also ultimately would require dismantling much of the Great Society and even the New Deal, thereby paving the way for vast increases in poverty and deprivation.

Even more fundamental is the risk that such tactics would pose to American democracy.  The lesson being drawn is that a majority in just once House of Congress may use the threat of default to bring the government to its knees in order to pursue its radical vision for America’s future.  The will of one party in the House or Senate would effectively replace agreement among both Houses of Congress and the President, undermining democracy.

If we head down this path in the years ahead, we will become a very different nation and society — coarser, harsher toward the vulnerable and people experiencing what FDR termed the “vicissitudes of life,” unable to invest in our future, and willing to tolerate degrees of poverty and inequality that are present nowhere else in the Western world.

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More About Robert Greenstein

Robert Greenstein

Greenstein is the founder and President of the Center on Budget and Policy Priorities. You can follow him on Twitter @GreensteinCBPP.

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11 Comments Add Yours ↓

Comments are listed in reverse chronological order.

  1. Douglas #

    With a decent pension and Social Security I live comfortably. Unfortunately my former co-workers will not have that luxury. Like many other private sector employers, my former employer has replaced its pension with 401s. Few of these workers will be able to save and earn enough to come close to matching what a pension would provide. Social Security and Medicare cuts will impose extreme hardships on an increasing number of Americans who will retire without pensions.
    Making money on the stock market or elsewhere in a 401 is somewhere between very difficult and impossible. This is a crisis in the making.

  2. JP #

    Wasn’t the same proposed but no one says jack and secondly turbo tax Timmy geitner self imposed the debt ceiling crisise

  3. Daniel #


    All the President has to do is refuse to sign Congress’ yearly budget into law unless it is accompanied by the corresponding increase in the debt ceiling. Quasi-Gephardt-Rule-esque.

    • Sarah Smith #

      And if Congress refuses to raise the debt ceiling at that time?

    • Sarah Smith #

      And if Congress refuses to an increase in the debt ceiling? Is the President just to keep refusing?

  4. Jonathan Reuel Seaver #

    Are we becoming a banana republic?

  5. Anthony Miller #

    Is it not true that the 2012 Budget is reduced by $22 Billion which most of it is defense spending and 2013 spending cut is small as well? The cuts will not take place until 2014 when the economy is hopefully strong enough to handle such cuts.

    I understand the possiblity of what may happen if a deal is not reached but isn’t the doom and gloom a little too much.

  6. jude #

    all spending cuts need to start with the MIC, the wars need to be brought to an end, overlapping, liberty squashing intelligence agencies like HS need to be quashed and done away with, THEN and only then, should further cuts be considered. There is not one whit of reason in the assault of the US on foreign nations, only rationalization and untruths. Its costing us our sovereignty and liberty to allow this folly of a course of action to continue unchecked and unanswered for. Our leadership needs a course in genuine world history, banking history and the factual manipulations of global futures before they should be permitted to run for office. The corporations need to lose their “personhood” yesterday, and lobbying needs to be outlawed outside of that coming from individual citizens and groups of citizens for whom our laws should be a protection, not a downfall or guarantee of failure.

  7. Michael Nutkiewicz #

    Some people on the liberal side of the isle say that the deal is an “end run” around the House Republicans because it leaves the basic safety net of Social Security, Medicare, and Medicaid untouchable while allowing the President to made cuts in defense. In other words, they are putting a better spin on it that CPBB. Can you help us understand if this interpretation is correct?

  8. Anyse #

    Thank you. I do not see your brief analysis as reactionary or socialistic or bleeding heart liberalism. I see it as a truth that is hard to swallow. Living in a country that stands for liberty and justice for all, has become a part of having to tolerate a weeping wound that can not be healed with a simple band-aid, which is what the budget will propose for the poor and those on Medicaid. I am disheartened, to say the least. I have seen this coming since the beginning of the “born again” movement in the US in the mid-70’s. Conservatives who see America as a “Christian” country that should benefit from no separation of church and state (and have won many federal funds to actually pay for functions of churches to further proselytize their beliefs) really do want a theocracy. What they do not see is the fanaticism that this can further create as well. Just think about the Spanish Inquisition or our own current “Crusades” in the Middle East as our current policies appear more of an extension of these historical horrors in our own time. I am saddened. I now speak with people who want to leave this country because they also see the writing on the wall; however, immigration policies are extremely upheld in other countries around the world with financial responsibilities and educational/professional training that most people cannot meet. So, many are “stuck” here, wanting to get out. This group will become larger and larger over time as these policies are continued. I am saddened.

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