Video - Raising the Debt Ceiling: It Just Makes Sense. Not.
As Reason columnist and Mercatus Center economist Veronique de Rugy, has pointed out, we’ve maxed out the nation’s credit card in the past without dire results. In the mid-1980s, the mid-1990s, and in 2002, for instance, the debt limit wasn’t raised for months at a time and the government got along just swell. The government has a big bag of tools it can use, ranging from playing around with the amount of spending that is liable to the limit to prioritizing interest and debt payments over other outlays. Interest on the debt for this year is projected to be about $225 billion and government revenue is expected to be around $2.2 trillion, so the government can easily pay the vig and avoid defaulting.
The boldest plan to rein in spending and debt comes from newcomer Sen. Mike Lee (R-Utah), a Tea Party favorite who dispatched Republican incumbent Bob Bennett in the primaries before coasting to victory in the general election last fall. Lee has vowed to block passage of a debt-limit increase unless Congress signs on to his balanced-budget amendment which would cap annual federal spending at 18 percent of Gross Domestic Product (GDP). The amendment would require a super-majority of two-thirds in the Senate and House of Representatives. Lee’s bill is competing with another Republican proposal from Sens. Hatch (Utah) and Cornyn (Texas) to cap spending at 20 percent of GDP. The Hatch-Cornyn bill has weaker rules on its higher cap as well.
In 2010, spending came to about 24 percent of GDP and it’s expected to come in around 25 percent of GDP in 2011. Since 1950, total federal revenues have averaged 17.8 percent and have reached higher than 20 percent exactly once. Spending over the same time has averaged just under 20 percent.
Sen. Mike Lee, R-Utah, repeated Monday his plans to block raising the federal debt ceiling until a balanced budget amendment is brought to a vote. An amendment Lee coauthored with Sen. Jon Kyl, R-Ariz., would require Congress to balance the budget each year and keep spending at 18 percent of GDP.
“It’s unsustainable, and it’s also way out of whack with what the practice has been over the last 40 years, which puts us between 18 and 19 percent of GDP,” Lee said on Fox & Friends. “We need a federal government that’s not so big and so expensive.”
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