【International Observation·Legislative Chaos in the U.S. Congress】
Author: Liu Weidong (Research Fellow, Institute of American Studies, Chinese Academy of Social Sciences)
The issue of the U.S. debt ceiling is a "common" and "frequent" problem that has troubled U.S. governments and society for many terms, and its occurrence has become increasingly frequent in recent years. Not long ago, the U.S. debt ceiling faced a crisis again, and the Democrats and Republicans finally reached a compromise before defaulting after a long time of back-and-forth negotiation. The Republicans agreed to raise the debt ceiling again, but forced the Democrats to make concessions on issues such as reducing both defense and non-defense account spending, including reclaiming COVID-19 aid funds, cutting allocations to the IRS, and raising the minimum age for receiving food stamps without working. However, the compromise between the two parties is temporary, and both sides have members dissatisfied with the outcome. Moreover, since the root cause has not been removed, the next crisis will come soon.
The Debt Ceiling Crisis Highlights Defects in the U.S. System
The U.S. federal government relies on taxes and borrowing to fulfill its financial obligations, which involves three parts: statutory spending, including Social Security, Medicare, pension subsidies, etc.; discretionary spending, including domestic, international, and defense spending; and interest on government debt. Since government revenue cannot meet its financial expenditure requirements, borrowing has been a common means of raising funds for successive U.S. governments. Buyers of government bonds are mainly American citizens, institutions, and foreign governments, and early U.S. gold reserves were an investment guarantee. After the dollar abandoned the gold standard, the U.S. government's credit became the main guarantee for attracting debt investment.
But money must be borrowed and repaid. If borrowing excessively, the government may lose its ability to repay the debt. Therefore, in 1917, the U.S. government passed the "Second Liberty Bond Act," stipulating that Congress would control the issuance of various bonds by setting a debt ceiling. If federal debt reaches the ceiling and the ceiling is not raised, the government cannot pay the interest on the debt, resulting in a federal debt default. The consequences of default are serious, including the inability of the Treasury to continue issuing bonds; government shutdowns resulting in no provision of certain services; U.S. bondholders unable to obtain investment interest; large-scale bank runs, economic slowdown, increased unemployment, social unrest; severe shocks to the global economy and financial markets, even triggering global financial turmoil.
The debt ceiling is established by the U.S. Congress and approved by the President, and changing the debt ceiling must be carried out according to normal legislative procedures. Since 1940, Congress has initiated more than 90 legislative changes to the debt ceiling, including 18 times since 2000. Before 1995, disputes over changing the debt ceiling were limited. Since then, the struggle between the Democrats and Republicans over this issue has intensified. Republicans oppose unconditionally raising the debt ceiling, and if it must be raised, they require significant budget cuts as a prerequisite. Democrats support unconditionally raising the debt ceiling to avoid crises and reducing the fiscal deficit by increasing taxes, while opposing cuts in social security, healthcare, and other areas. Due to the increasingly opposing positions of the two parties in recent years and their refusal to compromise with each other, the debt ceiling issue has become a hot potato in U.S. political life, once leading to a downgrade in the U.S. credit rating. Overall, the U.S. political system and partisan fighting are its main reasons.
First, the separation of powers between the executive and legislative branches is an important reason for the frequent occurrence of debt ceiling crises. The U.S. Constitution stipulates that Congress has the power to determine the U.S. tax and spending plans, acting as the "money bag" of the nation; the executive branch is responsible for proposing budget drafts for Congressional approval and subsequently managing specific spending. In reality, the executive branch understands the actual needs of the government for funds, while Congress does not have access to relevant information; the executive head needs to satisfy various voter demands to achieve political achievements, while Congress is responsible for overseeing whether its actions are appropriate.
The design of the balance of power has its rationality, but in actual operation, it cannot avoid falling into a power struggle between the two sides, often disregarding the overall situation. Congress often pays little attention to the real financial pressures faced by national development and focuses on restoring the "ideal state." They separate the vote to raise the debt ceiling from the vote to approve government spending or taxation to more effectively control the actions of the executive branch. The executive branch, on the other hand, focuses more on solving immediate problems quickly and is not too concerned about the potential risks that the surge in fiscal spending brings to the country's future development. Therefore, the "sweeping of snow in front of one's own door" caused by the decentralization between the government and Congress is a hurdle that cannot be overcome in solving the debt ceiling problem.
Second, the debt ceiling crisis is a specific manifestation of the inadequacy of the U.S. government's governing ability. Any country's development requires government investment, but living beyond one's means is always unsustainable. Generally speaking, the ratio of unpaid national debt to GDP should not exceed 60% for a healthy indicator. Although some people believe that a moderate fiscal deficit is conducive to economic development, the current size of the U.S. federal debt has exceeded 31 trillion dollars, reaching 124% of GDP, and continues to rise.
The root cause of the U.S. debt's continuous record highs lies in two points: first, government selfishness and blind pursuit of gain, focusing on immediate effects without considering income or investment returns; second, overspending without self-reflection, borrowing from the future, eating the seed corn, borrowing money from the world, and shifting risks. Therefore, the fundamental problem lies in debt, not the debt ceiling. The U.S. government has always regarded raising the debt ceiling as the ultimate solution to the debt default problem, weaving a big trap with small gains, ignoring the hard truth that debts must be paid back, reflecting a lack of responsibility.
Third, the intensification of intra-party struggles in both parties has exacerbated the contradiction. Overall, the Democrats and Republicans have opposing views on the debt ceiling issue, but the degree of opposition varies at different historical stages. In recent years, however, there has been a clear division within both parties, with the influence of populism and political polarization increasing. This is especially evident within the Republican Party.
Fourth, the debt ceiling issue has long been a tool for both parties to attack each other. The data since 1960 shows a contradiction between the two parties' basic concepts. Republicans in Congress have traditionally opposed raising the debt ceiling but did not mind violating their proclaimed concepts when the White House was under their control.
Additionally, the two parties, although supporting some reductions in federal spending, diverge on what needs to be cut. For example, the Republicans aim to cut defense spending and certain domestic programs, while these are investment priorities for Democrats.
Taking Trump as an example, he signed legislation to support raising the debt ceiling three times during his tenure but now urges Republican colleagues not to give in to Biden. However, after the two parties reached a compromise, Trump focused on promoting a golf tournament and attacking intra-party presidential rival DeSantis, seemingly losing interest in the debt ceiling issue.
Fundamentally, the debt ceiling crisis stems from the U.S. government's reckless spending. Congress set the debt ceiling to prevent the White House from issuing bonds indiscriminately, but the debt limit has been repeatedly broken. In reality, setting the debt ceiling is merely a stopgap measure or even a blindfold, and its necessity is questionable. If the U.S. does not reflect on its system from the root, it will only lead to the continuous breaking of the debt ceiling, a decline in government credit, and serious hidden dangers to the world economy due to the spillover effects of its domestic behavior.
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