The legal construct known as the national debt ceiling is one of the biggest fictions in Washington, a place that surrounds itself in more stories than City Lights. The debt ceiling is a set limit to the national debt, beyond which Congress cannot borrow.
Sounds pretty scary, right?
It’s not. Every time the national debt starts creeping up toward the “limit,” Congress passes some resolution that increases the limit. That increased limit is inevitably and eventually reached, of course, forcing Congress to “act” again (if by the word “act,” you actually mean taking no action, but instead giving yourself another free pass to profligate away.)
So once again, the national debt is approaching the debt ceiling, currently standing at $14.3 trillion, and the game is starting up again. What makes it different this time, though, is the new GOP-led House in Congress, which at least talks a big game on deficits. They will get a chance, very soon, to prove they’re more than talk. Will they just do like past Congresses, and raise the limit? Or will they use this as a “teaching moment,” an opportunity to put their rhetoric into practice?
The Treasury Secretary, Tim Geithner, wrote a letter to Congress, imploring it to raise the limit. The irony of the what is essentially the nation’s chief financial officer begging the board of directors to be less fiscally responsible, there’s a slightly more anxious tone to this year’s letter than there was to last August’s letter.
What’s got the Treasury Secretary so worried is that if the ceiling isn’t raised, Congress legally won’t be able to borrow any more money. That would raise the prospects that the U.S. government would default.
Given how the feds have been issuing a lot of short-term debt in the past few years to take advantage of the low interest rates, I wonder how real the prospect is this time around.