Untangling the Debt Limit Debate

I don’t know who first said it, but those who like laws and sausage should not observe how either are made. And to provide you a disclaimer, we are going to talk about one of these things right now.

As you might suspect, it is prudent for a government to have a budget. For the six years preceding 2015, Congress failed to pass any budget. Of course, this was largely because the Senate was controlled by Democrats and the House was controlled by Republicans, and they refused to agree on anything.

Republicans gained control of the Senate in 2015, thereby gaining entire control of Congress, and a budget was finally passed in 2015. However, just because the Republican controlled Congress passed a budget still didn’t mean a Democratic president would agree to it and sign it into law. And so, there is still no official budget for our government.

If we have no budget, then who decides how government money is spent? Well, it is still Congress and the President, but on an ad hoc basis. In other words, pieces and parts of the budget get negotiated only when they absolutely need to be done. There are 12 regular appropriation bills that need to be passed each year to fund the government, and these are taken up separately or in groups as part of an “omnibus” spending bill, instead of figuring it all out in one budget. It is when one of these omnibus spending bills expires and needs to be re-approved, we start to hear clamoring of government shutdowns.

But, a government shutdown is unrelated to the debt limit. You see, just because an omnibus bill is passed doesn’t mean there will be enough money to fund it. Our government operates at a loss, and passing an omnibus bill tells the Treasury how it must spend the money, but it does not empower the Treasury to go apply for an increase on its credit card to cover the operating loss. Congress and the President need to also agree to do that together. And so, Congress and the President will agree to a spending bill, while not necessarily agreeing to increase the debt limit to pay for that spending bill. It all seems a little crazy. Actually, given the size of our government and economy, it seems very crazy!

It would seem logical that a budget, spending bill, and debt limit would all be interconnected and dealt with at the same time. Instead, our politicians see it as an opportunity to have three different fights. All three items have been separated from each other, and nobody is trying to make it all fit together. It seems like a waste of time, it seems illogical, and it almost makes you sick to your stomach as if you were watching sausage being made.

As frustrating as this seems, I suppose it is democracy. I want to believe some of our founding fathers would be appalled by the gridlock, and yet others would be shocked we haven’t evolved a better process for getting this done. But I bet there would be some of them that believe this is exactly the way things are supposed to work. It is America’s unique way of having its cake, and eating it too.