By
Philip Bump
National correspondent
Yesterday at 6:58 p.m. EDT
Theoretically, the debt ceiling makes sense. We, the American people, will through our elected leaders establish a limit on how much the federal government can go into debt. Say: X dollars. That’s it. No more. Once you hit X, you stop. Done.
We tend to think about this idea in the context of our own spending. If you have a credit card, it probably has a limit. You can’t spend any more than that. Or maybe, every so often, you call the credit card company to cajole them to allow you to increase the debt you can carry. Perhaps they acquiesce, allowing you to spend more on the card — but obviously making it that much more burdensome to pay off. This analogy makes sense.
But it’s an incomplete one. A better analogy is of being the accountant at a business whose owner has signed contracts agreeing to purchase a certain amount of material and then having to cover those costs with an available credit limit. The money has been committed, and there’s nothing you can change about that. Your job is simply to use the card to pay what’s owed — or, perhaps, to beg the bank to let you do it.
Well, not the bank, really. A better analogy is that you have to beg the business owner to let you put more on the credit card, but because he likes to tell people how little credit card debt he has, he’s always reticent to let you do it. You explain, over and over, that if he doesn’t let you put more on the card, he’ll default on his debt, but, see, he really likes to tell people how little debt he carries and how effectively he’s keeping costs under control at the business. He can really be a dope.
Or really, it’s like there’s a management team that approved that spending but part of the team wants to make the CEO of the company look bad by defaulting on his obligations. Oh, and also this whole thing could go away if the management team just decided to say a magical word that instantly evaporated all the money the company owed but they were worried about the curse that a wizard warned might accompany saying the word. (This actually has a real-world equivalent, but this business-owner analogy is already four paragraphs long and honestly trying to explain the magic word — the creation of a coin worth a trillion dollars — would take another 14.)
In case it wasn’t clear, the point is that the limit that Congress imposes on the debt that results from its own spending is not cleanly analogous to anything at your house. In a way, it’s more like the rationalizations of someone who’s bad at their diet: I’m only going to eat 14,000 calories this week — until Thursday rolls around, you’re 13,800 calories into your week and your cap gets adjusted upward.
One thing the debt ceiling does effectively, though, is introduce periodic moments at which Congress can have high-stakes debates over raising that limit. This is a relatively novel addition to our creaky republic, these extended, bitter fights over whether it should be raised at all. But since Republicans began using the limit to pressure Democrats on government spending about a decade ago, it’s been a regular part of the struggle over the budget with (usually) Republicans using potential increases as attempted points of leverage.
While the headline of this article implies the debt ceiling doesn’t accomplish anything, that’s not entirely accurate. It does actually contain government debt, if not government spending. You can see on the graph below how the total debt held by the government (the black line) runs below the debt ceiling (the yellow bars). But what you can also see is that when the black line starts getting close to the lower edge of the yellow bars, the yellow bar gets raised. After all, Congress has already authorized the spending that’s driving that debt, so the executive branch has little choice but to accrue more debt to pay those bills. Just a few more calories to get through Saturday! But every week.
You can also see how about a decade ago the yellow bars occasionally stopped being raised. There are several moments at which the black line hugs the ceiling before it again surges upward. Those are the extended fights over the debt ceiling, the moments when Congress adamantly insisted it wasn’t going to raise the limit until it did.
Again, the upward trajectory of the debt affects the debt ceiling, not vice versa. Notice the increase in debt marked with an “A” on that chart. That’s the 22 percent increase in the debt that accompanied the government’s efforts to combat the Great Recession in 2008 and 2009. The debt ceiling went up; the debt went up. During President Barack Obama’s first term, there was a furious fight over the debt ceiling, but up it (eventually) went.
At times, Congress has simply suspended the debt limit. Those are the periods during which there is no yellow bar; the government could just accrue the debt it needed to cover its obligations. It was during the most recent suspension that we got the increase marked with a “B,” the increase in the government debt of nearly 20 percent between February 2020 and February 2021 as a result of the coronavirus pandemic.
That suspension was part of a deal reached in 2019 that froze the limit for two years; that is, until this summer. At the time, there was concern among those who had been paying attention for the past few years that this simply set up a situation in which Republicans would have leverage in mid-2021 to pressure a potential Democratic president. And, lo, here we are.
Treasury Secretary Janet L. Yellen told legislators Tuesday that the government would hit the limit in about three weeks. The accountant is telling the management team that it really needs to authorize putting more on the credit card, but the management team is too busy with its food fight.
You know. Like at your house.
Philip Bump
National correspondent
Yesterday at 6:58 p.m. EDT
Theoretically, the debt ceiling makes sense. We, the American people, will through our elected leaders establish a limit on how much the federal government can go into debt. Say: X dollars. That’s it. No more. Once you hit X, you stop. Done.
We tend to think about this idea in the context of our own spending. If you have a credit card, it probably has a limit. You can’t spend any more than that. Or maybe, every so often, you call the credit card company to cajole them to allow you to increase the debt you can carry. Perhaps they acquiesce, allowing you to spend more on the card — but obviously making it that much more burdensome to pay off. This analogy makes sense.
But it’s an incomplete one. A better analogy is of being the accountant at a business whose owner has signed contracts agreeing to purchase a certain amount of material and then having to cover those costs with an available credit limit. The money has been committed, and there’s nothing you can change about that. Your job is simply to use the card to pay what’s owed — or, perhaps, to beg the bank to let you do it.
Well, not the bank, really. A better analogy is that you have to beg the business owner to let you put more on the credit card, but because he likes to tell people how little credit card debt he has, he’s always reticent to let you do it. You explain, over and over, that if he doesn’t let you put more on the card, he’ll default on his debt, but, see, he really likes to tell people how little debt he carries and how effectively he’s keeping costs under control at the business. He can really be a dope.
Or really, it’s like there’s a management team that approved that spending but part of the team wants to make the CEO of the company look bad by defaulting on his obligations. Oh, and also this whole thing could go away if the management team just decided to say a magical word that instantly evaporated all the money the company owed but they were worried about the curse that a wizard warned might accompany saying the word. (This actually has a real-world equivalent, but this business-owner analogy is already four paragraphs long and honestly trying to explain the magic word — the creation of a coin worth a trillion dollars — would take another 14.)
In case it wasn’t clear, the point is that the limit that Congress imposes on the debt that results from its own spending is not cleanly analogous to anything at your house. In a way, it’s more like the rationalizations of someone who’s bad at their diet: I’m only going to eat 14,000 calories this week — until Thursday rolls around, you’re 13,800 calories into your week and your cap gets adjusted upward.
One thing the debt ceiling does effectively, though, is introduce periodic moments at which Congress can have high-stakes debates over raising that limit. This is a relatively novel addition to our creaky republic, these extended, bitter fights over whether it should be raised at all. But since Republicans began using the limit to pressure Democrats on government spending about a decade ago, it’s been a regular part of the struggle over the budget with (usually) Republicans using potential increases as attempted points of leverage.
While the headline of this article implies the debt ceiling doesn’t accomplish anything, that’s not entirely accurate. It does actually contain government debt, if not government spending. You can see on the graph below how the total debt held by the government (the black line) runs below the debt ceiling (the yellow bars). But what you can also see is that when the black line starts getting close to the lower edge of the yellow bars, the yellow bar gets raised. After all, Congress has already authorized the spending that’s driving that debt, so the executive branch has little choice but to accrue more debt to pay those bills. Just a few more calories to get through Saturday! But every week.
You can also see how about a decade ago the yellow bars occasionally stopped being raised. There are several moments at which the black line hugs the ceiling before it again surges upward. Those are the extended fights over the debt ceiling, the moments when Congress adamantly insisted it wasn’t going to raise the limit until it did.
Again, the upward trajectory of the debt affects the debt ceiling, not vice versa. Notice the increase in debt marked with an “A” on that chart. That’s the 22 percent increase in the debt that accompanied the government’s efforts to combat the Great Recession in 2008 and 2009. The debt ceiling went up; the debt went up. During President Barack Obama’s first term, there was a furious fight over the debt ceiling, but up it (eventually) went.
At times, Congress has simply suspended the debt limit. Those are the periods during which there is no yellow bar; the government could just accrue the debt it needed to cover its obligations. It was during the most recent suspension that we got the increase marked with a “B,” the increase in the government debt of nearly 20 percent between February 2020 and February 2021 as a result of the coronavirus pandemic.
That suspension was part of a deal reached in 2019 that froze the limit for two years; that is, until this summer. At the time, there was concern among those who had been paying attention for the past few years that this simply set up a situation in which Republicans would have leverage in mid-2021 to pressure a potential Democratic president. And, lo, here we are.
Treasury Secretary Janet L. Yellen told legislators Tuesday that the government would hit the limit in about three weeks. The accountant is telling the management team that it really needs to authorize putting more on the credit card, but the management team is too busy with its food fight.
You know. Like at your house.
