Despite the political grandstanding of the past two weeks, congressional leaders have once again overlooked the ticking time bomb of the debt ceiling. As Treasury Secretary Steven Mnuchin warned this month, unless Congress raises the debt ceiling before the August recess, the United States will default on its debts at the beginning of September, prior to the start of the new session.
It’s an old story, and one that fiscal conservatives are tired of hearing. Last week’s long-term budget report by the Treasury Department serves as a grim reminder that unless Congress reins in its runaway entitlement spending, the U.S. is on course for fiscal disaster. Fortunately, a pair of fiscally minded Republicans have put forth a plan to resurrect what was once a cornerstone of the GOP’s platform and end these pointless debt ceiling debates for good.
Rep. Kevin Brady, R-Texas, and Sen. Mike Braun, R-Ind., have introduced the Maximizing America’s Prosperity (MAP) Act to address the United States’ $22 trillion national debt. The MAP Act would implement a Swiss “debt brake” that caps spending in relation to potential gross domestic product growth, mitigating the need for politically toxic entitlement reform. Fiscal conservatives should be proud to champion the MAP Act.
Under current spending levels, the Congressional Budget Office predicts deficits will exceed $1.1 trillion by 2022, while debt held by the public is projected to reach $28.4 trillion by 2029, approaching nearly 100% of GDP. When the deficit surpasses GDP growth, financial woes similar to the ones afflicting countries such as Greece will begin to take their toll.
Yet, few in Washington seem to care about the national debt. Republicans like former Speaker Paul Ryan failed to get spending under control when voters gave the GOP unified government. It shouldn’t even be shocking that the new Democrat-led House appears to be continuing that tradition of neglect.
Republicans are partly to blame, but Democrats don’t even seem to understand that the national debt is inherently a spending problem. They blame the deficit on the GOP’s tax cuts, but ignore that we were facing trillion dollar deficits years before the Tax Cuts and Jobs Act was ever enacted. Politicians on both sides of the aisle know this, but want to turn attention away from the real issue, which is not revenues. The real issue is the out-of-control spending levels supported by a vast majority of members in Congress.
Republicans and Democrats alike spend like sailors, and we should be thankful for the few members, such as Brady and Braun, who take their roles as stewards of the taxpayer seriously. The MAP Act is a serious proposal that would implement a tried and true budgetary measure, a Swiss debt brake. This is in stark contrast to leadership’s policy of continuously busting budget caps and disregarding fiscal restraint, while pretending to care by holding show votes on balanced budget amendments they know will not pass.
Switzerland successfully employed the debt brake in the early 2000s. The Swiss plan caps government spending increases at trendline revenue increase levels. In this way, the government will never grow faster than the private sector — nor should it.
The Brady-Braun plan is a close variation on the Swiss idea. It caps spending based on potential GDP, an economic statistic that measures sustainable GDP growth over the long term. Much like trendline revenue in Switzerland, potential GDP is a stable metric that ensures economic certainty and fiscal restraint. Under the MAP Act, increases in spending would slowly decrease as it did in Switzerland. When it was implemented, Swiss spending increases totaled 4.3% of GDP. Afterward, it shrank to 2.6%. Spending continued to decrease even throughout the 2008 recession. This is the restraint the U.S. needs in order to get its fiscal ship under control.
During periods of economic expansion, spending is legally prohibited from growing uncontrollably. Unused tax revenue in periods of growth cannot be used to create new, wasteful programs. The caps ensure this revenue goes towards debt and deficit reduction. This is a great way to keep the size of government in check while the economy maintains its upward trend in the long term.
Politicians talk a big game on the campaign trail about the costs of Social Security, Medicare, and Medicaid, but few are willing to lead on the issue because of the popularity of these mandatory spending programs that are driving us deeper and deeper into debt. Politicians must stop prioritizing their poll numbers over the long term fiscal health of our nation.
A Swiss debt brake would force spending prioritization by law, forcing otherwise unwilling politicians to finally make the tough decisions. Congress has kicked the can down the road on this issue for too long. It’s time to make sure they can’t kick it any further.
The national debt is the single greatest existential threat facing the U.S. today. A default on the good faith and credit of the U.S. would result in market chaos, higher borrowing costs, inflation, and possible recession.
After months of seemingly endless political theater coming out the House of Representatives, many people are starting to wonder if the newly elected Democrats are here to lead, or simply disrupt.
The sponsors of the MAP Act want to make good on a long-time GOP campaign promise to balance the budget and stem the tide of big government. At the same time, Democrats can actually take a concrete step towards demonstrating they are actually serious about reducing the deficit, instead of using it as a hollow talking point to undermine GOP priorities. With respect to both parties’ campaign trail rhetoric, adopting a Swiss debt brake would demonstrate that elected officials are, in fact, capable of acting in the best interests of the country.