Why the Biden-McCarthy debt ceiling bill is a temporary solution to an ongoing problem

House set to vote on debt ceiling deal despite opposition

The U.S. House of Representatives is set to vote on the debt ceiling legislation negotiated by Speaker Kevin McCarthy and President Joe Biden, aimed at averting a disastrous default. The deal includes a two-year debt limit extension paired with a two-year budget deal containing modest spending cuts, although GOP hard-liners and some Democrats have criticized it for being both too weak on spending cuts and too aggressive on conservative provisions. Nevertheless, the bill cleared a key procedural vote on Wednesday afternoon, with 241-187 votes, mostly from Republicans.

Background

The debt ceiling is an arbitrary limit imposed by Congress on the amount of debt that the Treasury can issue. When the Treasury reaches the limit, it needs to borrow more money to pay the government’s bills. If Congress fails to raise the debt ceiling, the government will not be able to pay its bills on time, leading to a default that could result in a catastrophic economic crisis.

In recent years, raising the debt ceiling has been a political tug-of-war between Republicans and Democrats. Republicans generally oppose raising the debt ceiling, arguing that it encourages excessive government spending, while Democrats generally support raising the debt ceiling, arguing that the United States has an obligation to pay its bills and that not doing so could cause a global financial crisis.

Debt ceiling crisis: An ongoing problem

The debt ceiling has been a recurring problem for the United States for years, and the current situation is its latest iteration. In 2011, a standoff over the debt ceiling led to a downgrade of the U.S. credit rating and a 17-day government shutdown, costing the economy $24 billion. In 2013, another debt ceiling crisis led to a partial government shutdown. In 2019, the Trump administration and Congress suspended the debt ceiling for two years, but the issue has reemerged with the expiration of this suspension in early August 2021.

Editorial and philosophical discussion

The debt ceiling crisis highlights the issue of political polarization in the United States and the need for both parties to compromise and find a long-term solution to this ongoing problem. It is evident that political polarization and partisanship have gotten worse over recent years, making it increasingly difficult to find common ground and work across the aisle. This phenomenon is not unique to the United States, but the country’s superpower status, global leadership role, and dollar hegemony mean that the impact of the U.S. debt ceiling crisis is not limited to its borders but spreads worldwide.

From a philosophical standpoint, the debt ceiling crisis underscores the tension between democracy and efficiency. Democracy’s essence is the theory that power lies with the people, meaning political decisions are made by elected officials accountable to the people. Efficiency focuses on making decisions based on what works best, regardless of who makes them. Prolonged debates about the debt ceiling create uncertainty and decrease confidence in the country’s ability to manage its financial affairs, which poses a challenge to both democracy and efficiency.

The passage of the McCarthy-Biden debt ceiling bill was a step in the right direction, but without a long-term solution, the United States will be confronted with another debt ceiling crisis in two years. Given the current polarized state of the nation, finding common ground may be challenging. However, it is essential to overcoming the crisis beyond partisan politics and put the country’s economic stability first.

Advice

As a new debt ceiling deadline looms, lawmakers must put aside their political differences and search for a long-term solution that avoids the recurrence of crisis every two years. It is time for the United States to establish a bipartisan, long-term solution to the debt ceiling problem to prevent it from becoming a regular topic of discussion and endangers the nation’s reputation as a reliable borrower. Raising the debt ceiling creates certainty and stability for the economy and financial markets, which is a prerequisite for economic growth.