Recently, President Obama requested an increase in the debt ceiling. Created in 1917, the debt ceiling limits the total amount of money the federal government can legally borrow. While Congress authorizes new spending, the debt ceiling controls the ability of the Treasury Department to finance the spending obligations Congress and the President have previously made.
The national debt currently stands at more than $14 trillion, which amounts to a $45,500 "birth tax" for every child born in America this year or $120,500 for each household. The federal government is currently borrowing more than 42 cents of every dollar it spends, much of it from the Chinese, and sending the bill to future generations who deserve better. It is time to put a long-term debt reduction plan in place which gets our fiscal house in order by cutting spending.
Failing to fulfill spending obligations would result in a United States default which could set-off a string of catastrophic events for our economy. It would substantially increase the cost of borrowing for the federal government which would in turn increase the cost of borrowing for all of us, creating a cascade effect on everything from pensions and 401(k)s to gas and groceries. Furthermore, a debt default could stop, limit or delay payments from the federal government, such as tax refunds, salaries to men and women in the military, veterans' pensions, and Social Security and Medicare benefits.
While defaulting on the federal debt would have serious consequences for our economy, it is equally clear continuing to borrow without significant spending cuts and substantial budget reforms is a serious threat to our fiscal future. The debt limit is not the real problem. The real problem is the federal government's spending addiction.
The debt ceiling originally functioned to force Congress to consciously and cautiously approve more borrowing. The periodic vote was intended to act as a check and balance against runaway deficits and debt. Over time, Washington has unfortunately treated the debt limit as a routine action. Since 1985, Congress has voted 27 times to increase the debt limit with little fanfare. Democrats and Republicans share equal blame; in fact, the debt ceiling has already been raised three times and by almost $3 trillion just since President Obama took office.
Like a family or business which finds itself in deep debt, we need to create and implement a realistic plan to balance our budget and pay down our debt to solve long-standing spending problems in a responsible way. Before there is any consideration of an increase to the debt limit, a solution to immediately address our debt crisis must be considered.
The debt limit is serving its intended purpose by allowing us to debate difficult questions which impact our fiscal sustainability, such as our long-term obligations to entitlement programs, the real effects of meaningful tax reform, or the impact of runaway regulatory policy. We must take advantage of this opportunity to face these challenges now, before it is too late.
For more information about spending cuts, the latest developments from Congress, or to sign up for my e-mail newsletter, please visit my website at www.adriansmith.house.gov.