Fact Checker’s guide to the debt ceiling

The following article by Meg Kelly was posted on the Washington Post website July 31, 2017:

With a deadline of Sept. 29 looming and Congress nearing their summer recess, the debt ceiling is primed to be a big issue when they return. Here’s what you need to know. (Video: Meg Kelly/Photo: Sarah L. Voisin/The Washington Post)

In May, Treasury Secretary Steven Mnuchin urged Congress to raise the debt ceiling before lawmakers recessed for the summer. Yet with lawmakers’ attention turned to health care for so long, there was little movement on the issue. And now, summer recess is here.

Mnuchin’s urging wasn’t without cause. Technically, the country has already hit the debt ceiling; the Treasury Department has resorted to “special measures” to keep the government out of default over the past several months. On July 28, Mnuchin sent a letter to House Speaker Paul D. Ryan (R-Wis.) that calculated that the Treasury would need an increase in its borrowing authority by Sept. 29 or the United States would default on its financial obligations.

Debt ceilings generally are rare. The U.S. and Denmark are the only two countries that manage borrowing this way. The Danes have set their limit so high that it rarely needs to be addressed. The U.S., conversely, has taken a more incremental approach, meaning the debt ceiling has to be raised more regularly.

First instituted during World War I, the intent of the debt ceiling simply was so Congress would no longer have to approve every transaction the Treasury Department made still maintain some control. For much of the century it has existed, voting to raise the debt ceiling was apolitical. It was something a president would request and Congress would pass. But as the country’s deficit grew, the debt ceiling lost its neutrality.

The Fact Checker has previously described the debt ceiling as a political “MacGuffin” — a device used to propel a plot forward, even though the device itself may be meaningless.

Ultimately, Congress has to raise the debt ceiling because a U.S. default would wreak havoc on the economy. But voting against the increase is a simple way for the minority party to make a point against the country’s growing deficit, while having full faith that the majority party will pass an increase — thereby saving the country from default. Former president Barack Obama illustrates this perfectly. As a senator, he railed against an increase. But as president, he berated Republicans for the same move, noting the sobering danger of U.S. default.

Mnuchin is urging Congress to vote on the debt ceiling now and talk about ways to curb spending later, which shows he is hoping to pass a “clean” bill. White House budget director Mick Mulvaney, however, has said he would prefer to have some potential spending changes attached to the debt ceiling bill.

With a potential battle over the debt ceiling looming, this video is a Fact Checker’s guide to the debt ceiling: how it works and how politicians have skewed it.

View the post here.