The fiscal cliff fight was not pretty and in the end the issue was only postponed. The next big fight will take the stage now concerning the debt ceiling. In about three weeks, the Treasury department will run out of its legal authority to borrow money. If the ceiling is not raised, the U.S. will default and will be unable to pay interest on its bonds, potentially collapsing the global financial system. So why do we have a debt ceiling? It serves simply as a negotiation tool. It brings the president to the table. So can we afford this negotiation tool in today’s politics?
The debt ceiling has been raised nearly 80 times since the 1960s without drama or delay. But as American politics has become more polarised, it has become an instrument of mass financial destruction. In the summer of 2011 Republicans openly used the threat of default to force President Obama and Democrats into a deficit-cutting deal. The episode prompted one credit-rating agency to strip America of its triple-A rating. Republicans, furious that in the recent tussle over the “fiscal cliff” they caved in on tax increases and have no spending cuts to show for it, are spoiling another fight. (Economist.com).
The blame game is a testament to the polarization. Senate Budget Committee Chairman Patty Murray said in a statement, “From threats of government shutdown each time an appropriations bill was about to lapse, to the artificial debt ceiling crisis of 2011 that required the Budget Control Act, to the year-end fiscal cliff brinksmanship — Republicans have time and again pulled budget negotiations out of the Budget Committees in ways that rattled the markets, hurt the economy, and increased uncertainty.” (Huffingtonpost.com). Michael Steel, a spokesman for House Speaker John Boehner (R-Ohio), responded by placing the blame on Murray and Democratic leadership, contending that the Senate’s failure to pass a budget since 2009 has left Republicans with few options. (Huffingtonpost.com).
Due to the uncertainty surrounding how we will address the fiscal cliff, the government is being forced into a very ineffective state. The preparation for what might come is very complex, proving to be time consuming and expensive. Government auditors found that the 2011 fight over the debt limit cost taxpayers more than $1.3 billion in additional borrowing costs. The uncertainty is not only taking a costly toll on the government, it hurts everyone who relies on federal funding. “All they can say when I check with them is, ‘You’re still being considered for funding, but we can’t move forward at this time,’ ” said Stephen Higgins, a professor of psychiatry and psychology at the University of Vermont awaiting about $19 million in two grants from the National Institutes of Health to study chronic disease and smoking. “When [Congress] punted on sequestration, I knew I just took it on the chin.” (Washington Post)
If a real agreement is not reached this time around, Republicans may force the President to the table every month. For the time being, Republicans see this as their only real option. But does it have any real power behind it? Can Republicans refuse to raise the ceiling? The government cannot legally default on its debts. Section Four of the Fourteenth Amendment, which says that “The validity of the public debt of the United States, authorized by law … shall not be questioned.” Both parties seem to be ready to let the destruction of the ceiling continue, while negotiations go nowhere.