No matter how often Congress decides to let the government shut down, the outcome is always the same — more debt.
It’s not a direct cause and effect. Perhaps I should phrase it this way: The outcome is never less debt, which is exactly what the nation needs.
Years ago, at the start of a different shutdown, I wrote, “We may learn soon that we don’t need as much government as we think we do. But we eventually will learn that we need one that pays its bills and quits running up debt like a college kid with a credit card and a yen for pizza parties.”
I wouldn’t change a word to describe the situation today as Washington politicians have again shut down much of the government.
The national debt and the shutdown
But, you may argue, this shutdown isn’t about the national debt. It’s about Democrats’ demands that cuts to Medicaid be rolled back and that tax credits to help people pay for health coverage under the Affordable Care Act be extended.
You may indeed argue the merits of those things. You may argue about moral imperatives or for the government’s responsibility for the well-being of its citizens. But the items in question have price tags, and the nation has a debt load that is speeding out of control. Major ratings agencies already have downgraded the nation’s credit rating. Moral imperatives scatter in the face of a fiscal crisis.
The main question driving the current shutdown ought to be how to pay for the things people argue Washington has an obligation to do. If that doesn’t dominate discussions today, it may soon dominate them in terms much more difficult to control.
In any event, government shutdowns have proven to be ineffective tools for forcing fiscal responsibility.
In 1995, when the government shut down for 21 days, the national debt was about $4.9 trillion. In 2013, when it closed for 16 days, it was in the $16 trillion range. Figuring for inflation, those numbers would be $10.3 trillion and $22.1 trillion today, respectively.
But today’s debt is somewhere between $37 and $38 trillion.
It seems as if the shutdown scenario always is the same. Republicans stand on principle against costly spending. Democrats, as they do today, claim cuts to vital programs are heartless.
Tackling the hard issues
Maybe they are. But, either way, the count on the debt is continuing to rise no matter the outcome of this shutdown. To actually tackle deficit spending, Congress would need to reform Social Security and Medicare. Neither of those is affected much by the shutdown because they don’t rely on yearly congressional appropriations. Their funding and funding increases are guaranteed by law.
The other big budget item is the military. Each of these would require political courage and hard work to reform. Today’s shutdown, ostensibly over a pandemic-era subsidy for the Affordable Care Act, is small potatoes.
Why is tackling the deficit so important?
What could happen?
The Peter G. Peterson Foundation, which works “for solutions to put America on a sustainable fiscal path,” according to its website, notes that the recent downgrades in the U.S. credit rating put it on a list of second-tier countries, but that its debt-to-GDP ratio argues it should be lower still. The only thing keeping it on that list may be the dollar’s position as the world reserve currency.
A further drop in credit rating would force the nation to offer investors a higher rate of return. That in turn would increase interest rates generally. “This upward pressure on yields would occur in an already high-interest environment, which has substantially increased the cost of servicing the nation’s existing debt load,” its website said.
The government’s annual interest payments on its debt, already approaching $1 trillion, would go higher, crowding out private investment and making it harder to fund government programs. That would affect consumer spending and, ultimately, employment and national security.
What Congress and the White House would do then is anybody’s guess. The only sure thing is that today’s government shutdown would seem insignificant by comparison.
