The government shutdown clamor is about to merge with another manufactured crisis: the need to raise the debt ceiling. The debt ceiling is how much the U.S. is legally allowed to be in debt, and it has to be raised so that the U.S. government can actually pay for what it’s already bought. The credit card metaphor basically works here. However, let’s be clear about the consequences. If you are late on a credit card payment, you get fined, and it’s a legitimate bummer. If the U.S. fails to raise the debt ceiling, the government defaults on its loans, and the economic consequences reach across the country and to every country the U.S. trades with (which is more or less every country).
So, why don’t we just raise the debt ceiling? We can afford to, and all it takes is congressional approval. However, that congressional approval is not necessarily forthcoming. John Boehner and the Republican Party insist on using the threat of default as leverage to score some policy points. Because we’re talking about the debt ceiling, Republicans have held to the concept of making their policy demands around deficit reduction.
Got all that? Now look at the graph above. As you can see, since the Bush tax cuts, spending has been higher than revenue, meaning the U.S. has run a deficit. The two lines diverge sharply as the recession hit in 2007 and Bush, then Obama compensated for this with the bank bailouts and multiple stimulus packages, causing a jump in spending and a high deficit.
But keep following those lines: since 2009 the deficit has been dropping quickly. Today, the deficit is as low as it has been in years, and it is projected to keep dropping. The deficit is still positive, and so debt increases, and we have to raise the debt ceiling, but the next time you hear someone mention the “exploding deficit,” ask yourself if this person or his or her party has something to gain from using the deficit as leverage.
Yes, we will have to deal with our debt, but reducing the deficit while the economy is still recovering will ultimately be harmful, unless you have found something in the budget that is truly useless (hint: check the Drug Enforcement Agency).