To avoid another dangerous debt-ceiling showdown, lawmakers need to repeal the statute that requires Congress to approve increases in the debt ceiling. They should replace it with a provision that requires automatic across-the-board spending cuts whenever spending exceeds the historical average of about 20 percent of GDP. That figure should also be adjusted by the Congressional Budget Office for demographic and economic trends that no one can control and for allowable increases in health-care spending.
This ensures that spending is kept under control, but recognizes that an aging population is going to necessitate that spending on seniors rise somewhat if we are to prevent the kind of damaging cuts to other programs that undermine economic growth and societal well-being.
The public is willing to pay higher taxes but only if they are assured that these are needed to reduce the deficit, not pay for a much bigger government. And placing limits on spending is a top GOP priority.
Eliminating the debt-ceiling rule is critical to allowing both parties to move forward without worrying about a new crisis every time the current ceiling expires. Leaving this vehicle in place just guarantees more car wrecks down the road. The current debt statute is an anachronism. Its primary function is not to rein in spending – since this is spending that Congress has already authorized – but rather to hold the economy hostage to one party’s demands.
Whatever the fiscal cliff’s economic consequences, they are not nearly as bad as a default on our debt.
Isabel Sawhill co-directs the Budgeting for National Priorities project at the Brookings Institution in Washington. She served as an associate director of the Office of Management and Budget from 1993 to 1995 during the Clinton administration.
