By Paul Winfree*
President Joe Biden has called for an increase in the debt ceiling. To avoid another fight with Congress on the issue ahead of the 2024 elections, he would need lawmakers to boost the current ceiling by roughly $2.5 trillion. This would allow for total debt of about $34 trillion, or 130% of the economy.
But Biden does not simply want a higher debt limit. He wants the limit to be “suspended” and unaccompanied by additional reforms. Congress should reject Biden’s bid and instead use the debt limit to strengthen the economy.
The debt limit was last suspended by Congress from August 2019 until July 2021. Over those 23 months, total federal debt increased by approximately $6.4 trillion, or $280 billion per month. That spending spree included COVID-19 relief under President Donald Trump and Biden’s $1.8 trillion “American Rescue Plan.” In July 2021, Congress fed the folly, raising the limit by about $3 trillion to help accommodate last year’s $1.7 trillion omnibus appropriations bill.
It is not irrational for a president to want unlimited and unchecked borrowing capacity. However, it is imprudent for Congress to allow it. A debt limit suspension, paired with no limits on the Federal Reserve’s ability to purchase government debt, would provide Biden with near endless capacity to use his “pen and phone” to runaround Congress. This opens the door for the president to indulge in more policies like his unilateral, and likely illegal, student-loan forgiveness plan.
The debt limit gives Congress the opportunity to strengthen the economy and to ensure that it remains resilient. Congress should begin by adopting Sen. Joe Manchin’s proposal to cap discretionary spending growth at 1% per year, which would reduce the projected deficit by about $1 trillion.
But Congress shouldn’t stop there. Using the debt limit as leverage, lawmakers should also enact reforms to boost economic growth, which would help generate additional revenue for deficit reduction. This should include proposals to expand energy production and reduce new regulations while increasing permitting, such as restarting the Keystone pipeline and opening federal lands and waters to development. Proposals like these would increase productivity and business development and enhance personal financial freedom and opportunities for workers.
The more recent increases in the debt limit did not reform government programs, but that is not the historical norm. Until 1917, Congress authorized all securities and tied them to specific projects. This policy was replaced to give the U.S. Treasury additional flexibility to manage government debt so that it would be more attractive to private investors.
But while Congress turned over day-to-day management of the debt to the Treasury, it did not abdicate its constitutional responsibility to oversee the debt. Indeed, for more than a century, Congress has used the debt limit to periodically review government programs and make course corrections.
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For example, as part of the 1943 debt limit increase, Congress repealed FDR’s executive order capping earnings at $25,000. In 1953, the Senate added more than 500 tax and appropriations amendments to a House-passed debt limit bill. In 1967, Congress froze federal hiring and imposed a cap on spending, excluding Social Security, the Vietnam War, veterans’ benefits and debt service costs. And in 1985, Congress enacted deficit targets that were enforced through automatic cuts to federal programs.
Good politics is not always good policy. But this time it is. According to a recent poll by the Pew Research Center, 84% of Republicans and 68% of Democrats believe that strengthening the economy should be the top priority for Congress and Biden. As many Congresses have done previously, this Congress should listen to those voters and make a course correction.
The debt limit can be used as a tool to do just that. Congress should strengthen the economy by pairing an immediate increase in the debt limit and pairing it with reforms that will reduce the projected deficit and increase economic growth.
*Paul is a distinguished fellow in economic policy and public leadership at The Heritage Foundation.
This article is part of an agreement between El American and The Heritage Foundation.