The Debt ceiling vs. The Budget

It’s a Chicken or Egg Thing!
Lee Hamilton’s commentary in the July 5 Graphic was an attempt to explain “Why we need to scrap the debt ceiling.” With this article I am offering a contrasting viewpoint about the debt ceiling, which I like to call our country’s “approved line of credit.”
Hamilton’s message is one which comes up every time we begin running out of room on our authorized debt ceiling. His assertion is that the ceiling serves no purpose because by the time Congress comes around to debating an increase, they really have no choice because payments need to be paid for expenses already incurred.
I agree, at that point in time, it does become merely a political argument and there is no practical way to refuse to pay authorized expenditures already made. So, the debt ceiling is raised, and the bills are paid. But why do we arrive at this emergency situation in the first place? I’m convinced we are in a crisis because we don’t adequately connect the budgeting process to the debt ceiling approval.
Every time I hear the argument that the debt ceiling has no purpose, I conjure up memories of years past when I approved and provided commercial lines of credit. I can’t imagine myself, or another commercial lender, authorizing a significant credit line for a business without first understanding the implications of the spending budget and its impact on the expected maximum loan level? Hamilton is asking taxpayers to trust the budget process enough to remove the constraint, whether psychological or otherwise, of a “cap” on the line of credit. In my opinion, advancing the more progressive/liberal politicians’ vision, and budget discipline, are competing forces.
On the other side of the isle, the more conservative Republicans want to put firm limits on the U.S. debt ceiling. They believe that doing so is an important legislative action that is intended to create an orderly and responsible budget and funding process. My “take” on the political budget process is that Republicans try to tie spending to a maximum debt level, while the Democrats prefer to deal with each of the elements—spending, borrowing, and debt levels—separately, each in its own separate vacuum. The Democrats seem to have prevailed, and this has contributed to our fiscal problems.
Hamilton wrote: “This yearly battle isn’t worth it. The issue isn’t the debt ceiling, it’s the debt itself—and deficit spending.” This clearly implies that the U.S. borrowing limit is not related to spending decisions. That insistence on separation makes no sense to me. If he doesn’t want to be part of the problem, he should retreat from that position.
A budget leads to spending, which leads to taxes and borrowing, which often lead to a deficit, which leads to higher debt, which eventually leads to a need to increase the debt ceiling—and then the argument starts all over again. Any economic unit (individual, family, company, government) must consider all these factors. Appropriate limits create discipline and that leads to balanced decisions.
An appropriate limit on the ability to borrow is arguably the most important element of a financial plan. Determining that limit shouldn’t be delayed, and delayed some more, because the debate and vote is one Representatives “most dread.” By the time they finally get around to it, the country faces a liquidity crisis. Let’s stop arguing about “what comes first, the chicken or the egg.” And let’s give heed to Cicero who gave the following advice in 55 BC: “The budget should be balanced, the Treasury should be refilled, public debt should be reduced, (and) the arrogance of officialdom should be tempered and controlled.”