Just about every year, like clockwork, the issue of raising the federal debt ceiling generates apocalyptic and platitude-filled proclamations of impending doom from politicians, as well as breathless coverage by the mainstream press. Then, in the blink of an eye, lawmakers inevitably raise the debt ceiling and the issue disappears down the national memory hole as the news cycle moves on. Rest assured, the consequences of not raising the debt ceiling would be catastrophic, and with Treasury Secretary Janet Yellen warning Congress that the federal government will run out of cash and extraordinary measures by Oct. 18, the clock is ticking. So why is this issue even up for debate? Why do we need to have an apocalyptic partisan showdown almost every year over raising the debt ceiling, a procedure that used to be entirely mundane and uncontroversial?
In this interview for the TRNN podcast, Editor-in-Chief Maximillian Alvarez and political scientist Ed Burmila try to answer three basic questions for listeners: What the hell is the debt ceiling? Why is it a constant source of political anxiety? And should we care about it? Ed Burmila is a writer and political analyst whose work has appeared in outlets like The Nation, The Washington Post, Rolling Stone, The Baffler, and the Chronicle of Higher Education. He’s been publishing the popular blog ginandtacos.com since 2003, he hosts a companion podcast called Mass for Shut-Ins, and he is currently finishing a book that will be published in September 2022 with Bold Type Books on why the Democratic Party is stuck in a cycle of making the same mistakes.
Transcript
Maximillian Alvarez: Welcome, everyone, to The Real News Network podcast. My name is Maximillian Alvarez. I’m the editor-in-chief here at The Real News. It’s great to have you with us. So, even those who study DC politics for a living have had a hard time figuring out just what the hell is going on on Capitol Hill right now. Over the past week, Beltway news has been dominated by the possibility of a government shutdown as well as the Democrats’ inter-party fight over infrastructure and the Build Back Better Act, which would make good on a whole host of campaign promises from President Joe Biden and congressional Democrats, but is being opposed and possibly tanked by members of their own party.
A tangled political mess is unfolding on Capitol Hill, and the results will directly impact the lives of everyday people. But amid all of this, another question looms in the background. A question that seems to come up just about every year. A question that, like clockwork, generates apocalyptic and platitude-filled proclamations of impending doom from politicians, as well as breathless coverage by the mainstream press, only to seemingly dissolve into nothing and disappear down the national memory hole as soon as the news cycle moves on.
I’m talking, of course, about the debt ceiling. As Matt Egan at CNN reported last week, Treasury Secretary Janet Yellen warned lawmakers that the federal government will likely run out of cash and extraordinary measures by Oct. 18 unless Congress raises the debt ceiling. The new estimate from Yellen raises the risk that the United States could default on its debt in a matter of weeks if Washington fails to act. A default would likely be catastrophic, tanking markets and the economy, and delaying payments to millions of Americans. All right, well, that sounds pretty serious, but we’ve been here before. Many times before, in fact. Since the debt ceiling was imposed over a century ago in 1917, Congress has raised it nearly a hundred times, and it used to be something that hardly anyone batted an eye over, but raising the debt ceiling has become an increasingly politicized issue, as the current debate about the looming October deadline makes clear. Senate minority leader Mitch McConnell has said matter-of-factly that Republicans will not offer a single vote on raising the federal spending limit, leaving congressional Democrats to deal with the issue on their own.
We’re already getting a deluge of coverage from mainstream press about the perennial debt ceiling crisis, and it’s safe to say that we’re in for a lot more as the Oct. 18 deadline approaches. So, we thought it would be important to give Real News listeners a sort of primer on all of this so we can know, once and for all, what the hell is the debt ceiling, why is it a constant source of political anxiety, and should we care about it? So I couldn’t think of a better person to help us navigate all this than our guest today, Ed Burmila.
So, Ed is a political scientist with a PhD from Indiana University, and he’s also a frequent writer and analyst focusing on politics, culture, and weird history. He’s been publishing the popular blog ginandtacos.com since 2003, and he also hosts a companion podcast called Mass for Shut-ins. And if you haven’t already, you should absolutely read Ed’s blog and listen to his podcast, both of which are incredibly sharp, informative, and full of wit. So Ed’s writing has appeared in outlets all over the place, including the Nation, the Washington Post, Rolling Stone, the Baffler, and the Chronicle of Higher Education. And he is currently finishing up a book that will be coming out in September of 2022 with Bold Type Press, which explains why the Democratic Party is stuck in a cycle of making the same mistakes over and over again. [laughs] So, Ed, thank you so much for joining me today, man.
Ed Burmila: Was a fantastic intro. I’m glowing over here.
Maximillian Alvarez: [laughs] Well, yeah, I mean, I’m trying to kind of set listeners up so that you can knock it down, because I know you got a lot of thoughts on this debt ceiling stuff, and I’ve always found your commentary on kind of the Beltway issues that take up so much of our media coverage and that are largely Greek to your average American. I think you really unpack those in a really compelling way, in a clear-eyed way. And there’s just so much crap going on right now that I think we really need that sort of breakdown here. So, I was wondering if I could kind of turn things over to you and start with the basic question that I’m sure is on a lot of people’s minds: What is the debt ceiling?
Ed Burmila: You already covered one of the important points here, which is that this thing has existed for a long time, and it’s only recently, since 2011, in fact, that it’s become this annual or semi-annual political mess that it is. So, the debt ceiling is exactly what it sounds like. It’s an upper limit, statutory limit, on the amount of debt that the United States Treasury can issue. And, as everybody who’s listening is, I’m sure, well aware, we run an annual budget deficit, the gap between what the government spends and what it brings in in revenue, that gets filled with the issuance of debt. The money has to be created, in essence, by the Treasury issuing bonds and other kinds of financial instruments that are sold on the open market to make up the difference between revenue and spending.
Over time, that’s accumulated to a number that is never going to be paid back. We have about $29 trillion in cumulative national debt right now, so one of the things first and foremost to realize is that when people talk about how we need to cut spending to start paying the debt back, it’s never going to be paid back. And because the government operates on different principles than like a household budget or a small business’s budget, the idea that we have to pay the money back before we can spend any more is simply a fallacy. It’s a Trojan horse people who oppose spending on social programs use. So $29 trillion is a number where, if we zeroed out the federal budget, if we spent no money, it would take us about 15 years to pay down $29 trillion, spending $0.
So first and foremost, paying down the debt is just not realistic. The debt ceiling continues to get raised because we’re accumulating more debt, including interest on money we’ve already borrowed over time. This used to happen in Congress just sort of as a matter of course, the same way they would order more hand towels if they ran out in the men’s room. It wasn’t something that turned into a debate. But with Obama becoming president in 2008, and when the Republicans had some success after the 2010 midterms, Mitch McConnell discovered, or at least popularized, the idea that this was yet another thing where they could try to extract concessions from Democrats. So, the Republican plan when dealing with Obama was not to accommodate him in any way, not only refusing to vote for legislation that he proposed or whatever, but also refusing to do the basic sort of funding and operation of government stuff that Congress in the past usually just, you know, they did a voice vote, everyone said aye, and that was it. So, this was another of the things McConnell or some intern at the AEI looked up and said, y’know, we could screw them on this every year. And since then, Republicans have tried to use it as a political weapon.
That worked the first time they did it in 2011. The Democrats were running around going, oh my god, we can’t let the United States default on its debts. This would be a disaster. What can we offer them? The second time around, though, in 2013, this was one of the few examples of Obama sort of learning in real time how to deal with McConnell. They just looked at the Republicans and said, you know what? Fine, go ahead, let us default on the debt, because the consequences of the United States defaulting on its debt are incomprehensible, but bad. Nobody can tell you exactly what they are, but nobody who has understanding of what that would mean would actually want to live through it. You mentioned before some things like shutting down the government and perhaps a recession or whatever, defaulting on our obligations goes well beyond that. We would have a global financial crisis. The US Treasury instrument is kind of the reserve currency of the planet, and has been since the collapse of pound sterling in the post-World War II period, and the global economy and financial system is built on the foundation of the United States agreeing to honor its debts. If the debt ceiling isn’t raised and we begin defaulting on debt, that has the kind of consequences nobody is going to escape from.
In fact, the way I look at it, and one of the reasons why I think this is a manufactured political crisis, is that the truly wealthy might have even more to lose from a default and a collapse of the US dollar than people like us. If you don’t have much saved up or whatever, you would actually escape fairly lightly, although it would still be a disaster. But, the fact that people who have wealth that’s built up in US dollar-denominated assets that would suddenly lose a significant amount of their value if we defaulted, there’s simply too much for them to lose.
So, Obama sort of figured out they’re never really going to pull the trigger on this, and the Democratic approach since that one example in 2011 where they kind of played along with it has been to tell the Republicans, you know what? Go ahead, you’re not going to do this and we all know it. Because for all their dalliances with the extreme right and all that, the real power or driving force behind the Republican parties, Koch brothers-style billionaires who have way too much to lose, and they’re not going to see the value of the US dollar reduced considerably so that Kevin McCarthy can entertain some QAnon people. It’s just not worth it to the people who really wield power within the American right.
Maximillian Alvarez: But, Ed, I ask credulously, so you kind of mentioned this earlier, but shouldn’t the government work like a household? Shouldn’t we save more than we’re spending? I mean, like I said, you talked about this earlier and it’s the kind of talking point that we hear all the time as a justification for not raising the debt ceiling or opposing raising the debt ceiling, or more than anything, just using it as an excuse to kind of gut funding for essential services and investments in regular working people. The same “deficit hawks” never seem to mind when the military-industrial complex comes with its hands out asking for trillions more dollars there. So I know that folks listening will be hearing a lot of these same talking points about kind of equating the national budget to a household budget, and I was wondering if you could just kind of expand on that a little bit more, about why that’s bullshit.
Ed Burmila: Well, first of all, I look at it as simply a practical matter. Balancing the federal budget would be just incredibly difficult to do. The gap between spending and revenues, since the political will to do things like increase taxes doesn’t seem to be there, that gap grows annually. But let’s say, hypothetically, we do manage to balance our budget federally. The amount that we bring in in revenue is exactly the same as the amount we spend. We still have the matter, then, of an accumulated $29 trillion in debt that is never going to get paid down, because if we’re balancing the budget, that means the only thing we’re doing is servicing our interest on the existing debt. We’re not paying down the “principal” anymore.
But the important concept is that we maintain the faith and credit of the US Treasury by paying all the interest we owe on the money that has been borrowed. So if we cease to make those payments, then we have a potential problem. But, the size of the national debt as a number is used simply to scare people and to make them say, look at this big number. We have to pay that all back somehow. But we don’t, and that’s a very hard concept for people to wrap their minds around, and elected officials and never want to say it because it makes them sound like tax-and-spend liberals or whatever, but there is no requirement, statutorily, constitutionally, or theoretically that we have to reduce the national debt to zero for some reason, or what that would supposedly do for us if we did.
You could get an economist on here who could go into more detail on this than I could, but there are ways that you can cook the books to make it look like the debt is larger or smaller in a given year. Just like, for example, transactions like building a bunch of buildings and then paying people to knock them all down would increase the US gross domestic product, right? That would all count as economic activity, but it would be pointless. The way that the national debt is used in the political discourse is as a scare tactic to make people think that the national finances or whatever are the same thing as individual finances. But individuals borrow heavily. The government borrows heavily as well. The difference is, for the government, economic growth benefits the government in a way that it doesn’t necessarily benefit the individual, so if anything, they’re better positioned to take on more debt than you or I would be.
Maximillian Alvarez: So, I mean, I could talk to you about this all day, and I hope that for listeners this is just more evidence of why you should follow Ed’s work and definitely listen to his podcast, which I admit freely is one of my favorites. But, Ed, I know I can’t keep you for too long, and so I wanted to pick up on that point about how the debt ceiling is used in political discourse, and basically how much people listening to this podcast right now should care about it. Because for something that, as you mentioned, the results of defaulting on our debts would be quite catastrophic, and no one really knows the extent to that catastrophe. And it is something that obviously everyone wants to avoid. It is also something that we have always managed to avoid, and so every time we talk about the apocalyptic consequences of not raising the debt ceiling, turns into this kind of media circus for a couple of weeks or months, then it gets raised and then we move on, to return ever… the eternal return in the following year or two years or something like that.
So I guess there’s only so long this can go on before people just really check out and say, like, whatever, we haven’t defaulted yet. We’re probably not going to. Why should I care? But as you mentioned, it does strike people, I think in a very visceral way, for different reasons. The one that I always heard growing up as a conservative was both that kind of fiscal responsibility question. So it was used as, like you mentioned, as a cudgel to basically torpedo kind of social spending measures that would help working people. It’s never really mentioned by the same people when we’re talking about giant tax cuts for the wealthy that reduce our tax revenue. It’s never really used, as I mentioned before, when we’re talking about the military budget. It’s usually something that is brought up as a reason for not investing in, I don’t know, the basic kind of needs and services that working people in this country deserve, but I digress.
So I guess the kind of final sort of question on this is, how realistic is the fear that this issue will become so politicized that we will actually kind of blow past that debt ceiling and trigger this sort of doomsday scenario, and how should people listening, I guess, sort of navigate this question now and in the future?
Ed Burmila: Well, one thing that people should keep in mind right now is, just like the filibuster, the debt ceiling can be eliminated if Congress passed legislation that automatically raised it or eliminated it as a requirement for the Treasury altogether. That would solve the future problem for us. So number one point to take away from it is we don’t have to keep doing this to ourselves.
The second point to take away from it is that, like a lot of things in politics, the rich people feeling thermometer that is the stock market resolves this problem for us, ultimately, because we’ve been through this cycle before. I certainly feel like I’ve seen this movie enough times to know that the Republicans will bluff until three days before the deadline, the stock market will drop a thousand points, and then again the next day, and then again the next day, and then, oh, lo and behold, an agreement to raise the debt ceiling will be reached right at the last second.
I can foresee a future where the Republican party is crazy enough to let an actual default happen or in some way convinces themselves that they’re going to benefit from it politically. I personally think it’s a scenario like global warming or nuclear war. I don’t think anybody would really be the winner from a default on the debt, but right now I think the Republican party, for all its bluster and all its kind of attachment to fringe conspiracies and everything, still fears economic power more than it fears its own electorate wanting to see this stunt happen. So keep an eye on what happens the week before the Oct. 18 deadline. My guess, based on the recent past, is we’ll see the pattern I just mentioned, where you’ll see a big drop in the markets due to “uncertainty” and then that will bring the Republicans to the finish line and say, okay, we’ll raise it one more time.
But remember, the Democrats or even the Republicans for that matter, could stop this endless cycle. We don’t have to have the debt ceiling in its current form or at all. There’s just the lack of political will to change it.
Maximillian Alvarez: So that is political scientist, writer, podcaster Ed Burmila. Go check out Ed’s blog Gin and Tacos, check out his podcast Mass for Shut-Ins, and definitely be on the lookout for Ed’s upcoming book in September of 2022 with Bold Type Press. Ed, thank you so much for joining, man. Really appreciate it.
Ed Burmila: Thanks for having me.
Maximillian Alvarez: This is Maximillian Alvarez for the Real News Network, and before y’all go, please head on over to the realnews.com/support and become a monthly sustainer of our work so we can keep bringing you important conversations and news coverage just like this conversation today. Thank you so much for listening.
Republish our articles for free, online or in print, under a Creative Commons license.
