National Debt Ceiling—Is the Day of Fiscal Reckoning at Hand?
The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.
By Stephen R. Rolandi
September 30, 2021
Earlier this summer, Michael E. Ginsberg, a Washington D.C. based attorney, historian and former official in the Office of the Director of National Intelligence (DNI) wrote an interesting fictional novel, Debt Bomb, published by BQB Publishing, Inc., set in the future when the Peoples’ Republic of China (PRC) announces that it will not only purchase newly issued United States debt, but also insist on immediate repayment of debt that the United States owes the PRC; their action sets off a major global financial crisis.
Such a scenario may not occur, but Ginsberg’s work draws attention to the ever increasing total national debt of the United States. Currently, that debt stands at approximately $28.8 trillion, which when compared to the current United States total Gross Domestic Product (GDP) of almost $ 22.9 trillion, yields a debt-to-GDP ratio of nearly 126%. At the end of the Obama administration, the comparable numbers were nearly $20 trillion of debt, and $19 trillion GDP, for a debt-to-GDP ratio of 106%. Put another way, the average cost to each American of the total national debt currently averages about $87,000 per person. The United States budgets annually about $300 billion in interest debt payments.
As we approach the beginning of a new federal fiscal year on October 1, Congress is considering various budget appropriation bills (including President Biden’s proposed $3.5 trillion human service spending plan) as well as extending the debt ceiling.
The debt ceiling refers to a legislative limit on the amount of cumulative national debt that can be incurred by the Department of the Treasury; in effect, it is a limit on how much money the federal government can borrow—that is to say, the Treasury Department can stop issuing notes and borrow, and might default on interest payments owed to creditors. If the ceiling were not raised, the standard of living in the United States would decline and interest rates could sharply increase, as the nation would find itself in a position to be unable to pay off its debt.
(It should be noted that Congress first instituted a statutory debt limit with the Second Liberty Bond Act of 1917, and has raised the limit many times since then.
Some constitutional scholars maintain that the President of the United States also has that authority under the Constitution, but it has never been invoked).
Because expenditures are authorized by separate legislation, the debt ceiling does not directly limit government deficits. In effect, it can only restrain the Treasury from paying for expenditures and other financial obligations after the limit has been reached, but which have already been approved and appropriated.
Congress needs to raise the debt ceiling from time to time so that the United States does not default. During the last ten years, Congress has raised the debt ceiling 6 times—the last time this was done was in August 2019 when President Trump signed legislation suspending the debt ceiling until July 31, 2021 and setting that ceiling at $28.5 trillion, which has now been exceeded (note: fiscal analysts at the Bipartisan Policy Center and The Concord Coalition project that the window for a default could occur sometime between October 15 and November 4).
Treasury Secretary Janet Yellen has spent the last several months reaching out to Congressional leaders to convey to them the economic and financial risks of a default, contending that the Treasury Department’s ability to stave off default is limited and that failure to lift or suspend the ceiling would be “catastrophic,” (as reported in the New York Times edition of September 24, 2021).
In recent days, the House of Representatives voted 220-211 to pass legislation to prevent a government shutdown on October 1st and suspend the nation’s borrowing limit, but passage by the Senate seems unlikely at the moment. If the Senate were unable to pass a debt limit suspension measure, there would be a limited amount of time remaining for Congress to remove the debt limit measure out of pending legislation and pass a stand-alone spending bill to avoid a government shutdown—however, Congress would still have to deal with the debt ceiling problem.
One might think that the public would be concerned about this issue, but current opinion surveys find the issue of debt and default at the bottom of the list of issues Americans are concerned about (a Gallup organization survey found that only 2% of those surveyed mentioned the debt as an important issue).
But Americans’ view on this problem might very well change if Congressional inaction leads to a default on the federal debt later this fall.
There are many of us in the public administration and good government communities who have been warning about this impending crisis for years. The time has come for citizens across the nation to call upon their elected representatives in both parties to exercise leadership and make the hard spending and taxing choices to deal with this problem now, before irreparable harm to our nation’s economy—and by extension the global economy—occurs. And if elected officials do not take action, they need to be held accountable in next year’s Congressional elections. The stakes are very high on this issue.
Postscript: Students and citizens interested in learning more about the nation’s national debt problem might find recent publications by Tyler L. Chessman, Carl Lane or Lawrence Malkin very informative.
Author: Stephen R. Rolandi retired in 2015 after serving with the State and City of New York. He holds BA and MPA degrees from New York University, and studied law at Brooklyn Law School. He teaches public finance and management as an Adjunct Professor of Public Administration at John Jay College of Criminal Justice (CUNY) and Pace University. Professor Rolandi is a Trustee of NECoPA; President-emeritus of ASPA’s New York Metropolitan Chapter and past Senior National Council Representative. He has served on many association boards. He is a frequent guest commentator on public affairs and political issues affecting the nation and New York State.
You can reach him at:
[email protected] or [email protected] or 914.536.5942 or 212.237.8000.
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National Debt Ceiling—Is the Day of Fiscal Reckoning at Hand?
The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.
By Stephen R. Rolandi
September 30, 2021
Earlier this summer, Michael E. Ginsberg, a Washington D.C. based attorney, historian and former official in the Office of the Director of National Intelligence (DNI) wrote an interesting fictional novel, Debt Bomb, published by BQB Publishing, Inc., set in the future when the Peoples’ Republic of China (PRC) announces that it will not only purchase newly issued United States debt, but also insist on immediate repayment of debt that the United States owes the PRC; their action sets off a major global financial crisis.
Such a scenario may not occur, but Ginsberg’s work draws attention to the ever increasing total national debt of the United States. Currently, that debt stands at approximately $28.8 trillion, which when compared to the current United States total Gross Domestic Product (GDP) of almost $ 22.9 trillion, yields a debt-to-GDP ratio of nearly 126%. At the end of the Obama administration, the comparable numbers were nearly $20 trillion of debt, and $19 trillion GDP, for a debt-to-GDP ratio of 106%. Put another way, the average cost to each American of the total national debt currently averages about $87,000 per person. The United States budgets annually about $300 billion in interest debt payments.
As we approach the beginning of a new federal fiscal year on October 1, Congress is considering various budget appropriation bills (including President Biden’s proposed $3.5 trillion human service spending plan) as well as extending the debt ceiling.
The debt ceiling refers to a legislative limit on the amount of cumulative national debt that can be incurred by the Department of the Treasury; in effect, it is a limit on how much money the federal government can borrow—that is to say, the Treasury Department can stop issuing notes and borrow, and might default on interest payments owed to creditors. If the ceiling were not raised, the standard of living in the United States would decline and interest rates could sharply increase, as the nation would find itself in a position to be unable to pay off its debt.
(It should be noted that Congress first instituted a statutory debt limit with the Second Liberty Bond Act of 1917, and has raised the limit many times since then.
Some constitutional scholars maintain that the President of the United States also has that authority under the Constitution, but it has never been invoked).
Because expenditures are authorized by separate legislation, the debt ceiling does not directly limit government deficits. In effect, it can only restrain the Treasury from paying for expenditures and other financial obligations after the limit has been reached, but which have already been approved and appropriated.
Congress needs to raise the debt ceiling from time to time so that the United States does not default. During the last ten years, Congress has raised the debt ceiling 6 times—the last time this was done was in August 2019 when President Trump signed legislation suspending the debt ceiling until July 31, 2021 and setting that ceiling at $28.5 trillion, which has now been exceeded (note: fiscal analysts at the Bipartisan Policy Center and The Concord Coalition project that the window for a default could occur sometime between October 15 and November 4).
Treasury Secretary Janet Yellen has spent the last several months reaching out to Congressional leaders to convey to them the economic and financial risks of a default, contending that the Treasury Department’s ability to stave off default is limited and that failure to lift or suspend the ceiling would be “catastrophic,” (as reported in the New York Times edition of September 24, 2021).
In recent days, the House of Representatives voted 220-211 to pass legislation to prevent a government shutdown on October 1st and suspend the nation’s borrowing limit, but passage by the Senate seems unlikely at the moment. If the Senate were unable to pass a debt limit suspension measure, there would be a limited amount of time remaining for Congress to remove the debt limit measure out of pending legislation and pass a stand-alone spending bill to avoid a government shutdown—however, Congress would still have to deal with the debt ceiling problem.
One might think that the public would be concerned about this issue, but current opinion surveys find the issue of debt and default at the bottom of the list of issues Americans are concerned about (a Gallup organization survey found that only 2% of those surveyed mentioned the debt as an important issue).
But Americans’ view on this problem might very well change if Congressional inaction leads to a default on the federal debt later this fall.
There are many of us in the public administration and good government communities who have been warning about this impending crisis for years. The time has come for citizens across the nation to call upon their elected representatives in both parties to exercise leadership and make the hard spending and taxing choices to deal with this problem now, before irreparable harm to our nation’s economy—and by extension the global economy—occurs. And if elected officials do not take action, they need to be held accountable in next year’s Congressional elections. The stakes are very high on this issue.
Postscript: Students and citizens interested in learning more about the nation’s national debt problem might find recent publications by Tyler L. Chessman, Carl Lane or Lawrence Malkin very informative.
Author: Stephen R. Rolandi retired in 2015 after serving with the State and City of New York. He holds BA and MPA degrees from New York University, and studied law at Brooklyn Law School. He teaches public finance and management as an Adjunct Professor of Public Administration at John Jay College of Criminal Justice (CUNY) and Pace University. Professor Rolandi is a Trustee of NECoPA; President-emeritus of ASPA’s New York Metropolitan Chapter and past Senior National Council Representative. He has served on many association boards. He is a frequent guest commentator on public affairs and political issues affecting the nation and New York State.
You can reach him at:
[email protected] or [email protected] or 914.536.5942 or 212.237.8000.
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