Yes, it’s time to talk about the debt limit again.
Every time the U.S. bumps up against its debt ceiling, we start the cycle all over again. President Obama insists he won’t negotiate over the debt ceiling, but of course he will. Members of Congress grandstand about changing this vicious cycle, and then most clamber for the easy way out so they can return to matters they’d rather talk about, which is just about anything but cutting spending.
Meanwhile, federal spending continues its out-of-control expansion, and the debt clock keeps ticking.
We will hit the debt limit again on May 19. Treasury is expected to exhaust its cash management tools sometime in September or October. In the meantime, Washington’s periodic debt ceiling ritual will play out. Whatever happens, the debt limit should not be raised unless we are put on a path to balance the budget in 10 years. That’s the bottom line.
Debt ceiling fights are always about leverage—Members of Congress want to use the vote to extract concessions from the other side, usually the President. For example, tax reform is a much-needed pursuit, but it’s not the answer to the debt limit. Tax reform, done well, should strengthen the economy and produce more revenue, but it obviously cannot cut spending—and excessive spending is the near-term and the long-term problem.