“An increase in the national debt limit that is not accompanied by significant spending cuts and budget reforms to address our government’s spending addiction will harm private-sector job creation in America.”
So reads a statement by 150 economists supporting Speaker of the House John Boehner’s insistence that any increase in the debt limit must be matched by spending cuts.
The view stands in sharp contrast to the Obama Administration’s push for a clean $2.4 trillion increase to the debt ceiling. Obama has warned that, “If investors around the world thought that the full faith and credit of the United States was not being backed up, if they thought that we might renege on our IOUs, it could unravel the entire financial system.”
What our President conveniently left out was the fact that our current fiscal trajectory, one with deficits as far as the eye can see, is also enough to “unravel the entire financial system.”
In the last ten years we’ve raised the debt limit ten times. This year’s proposed $2.4 trillion increase would be the largest in our nation’s history, and is clearly designed to push off another potential hike until after the all-important 2012 elections. But investors, markets, and businesses care little about the politics behind the vote, they just want to know that the government will be able to pay off its debt. If we continue down our current course, that prospect becomes dim.
Between rising entitlement costs, growing health care expenditures, and compounding interest payments, durable reforms are needed to stave off default. The nonpartisan Congressional Budget Office recently warned that, “A growing level of federal debt would also increase the probability of a sudden fiscal crisis, during which investors would lose confidence in the government’s ability to manage its budget.”
It’s time to stop kicking the can down the road and acknowledge that while failing to increase the debt limit is bad, raising the ceiling without addressing spending is immensely worse. After all, “what good is increasing the debt ceiling if nothing is done to curb the reckless spending that will perpetually test any limit on borrowing, no matter how high?” asked NTU President Duane Parde.
That is why NTU is committed to fighting for a Balanced Budget Amendment, a statutory spending cap without tax increases, and repeal of the 2010 health care reform law as necessary prerequisites of any increase to the debt ceiling. Our resolve to fight for such measures has only been strengthened by the support of 150 economists who, like us, realize we are at a pivotal moment in history. If Washington fails to change course now, we will inevitably continue down the road to default.