Dumbest Moments: Debt ceiling edition

@CNNMoney July 29, 2011: 2:28 PM ET

NEW YORK (CNNMoney) -- Unemployment is over 9%, and set to stay high for the next several years. The economic recovery is stumbling badly. And our political leaders have spent the past few months in heated debate about whether we should pay the bills Congress already agreed to take on.

There's a real debate to be had about how big the government should be and what's fair when it comes to taxes.

But fighting over whether to pay our obligations? Well, that's just dumb at its core. And from a dumb debate, here are the dumbest moments.

No. 1: That there's a debt ceiling


It sure is a dumb system: Congress decides each year how much the government will spend and how much it will tax.

If lawmakers commit to spending more than the country takes in through taxes, we borrow the difference.

Congress regularly commits to borrowing more than is legally allowed by our quirky debt ceiling. It was implemented in 1917, and we're the only major economy to have one.

When the borrowing is on track to exceed the limit, the president has to ask Congress to raise the debt ceiling, as has happened 74 times since 1962 (and 10 times since 2001).

Usually there's a mini-debate, and then we raise it, making it essentially a formality. Until now.(Debt ceiling FAQs)

No. 2: "Clean" debt ceiling vote

May 24, 2011

That'll show 'em. In May, House Republicans called for a symbolic vote on a "clean" debt ceiling increase -- that is, giving the government the ability to borrow more without any conditions of spending cuts or tax increases.

The idea was that Republicans would show the world that they would vote it down -- and indeed, on May 31, the measure failed 318 to 97.

But doesn't a clean increase sound good right about now?

No. 3: 'Cut, cap and balance'

July 19, 2011

With roughly two weeks to go, House Republicans schedule another symbolic vote on the debt ceiling. Symbolic because they know that though it would pass the House, it would ultimately fail to become law. The bill would:

Cut...spending by $111 billion in 2012 (which is just too much, too soon without risking another recession)

Cap...federal government spending at 18% of the economy. Tough to achieve, given the growing demand for Medicare and Social Security as the country's population ages.

Balance...the budget via a constitutional amendment. Living within our means sounds good, but the problem with balanced budget amendments in general is that they reduce lawmakers' ability to respond to unforeseen events. More specifically, a problem with the measure in the Cut, Cap and Balance Act was that it would make it all but impossible for future Congresses to raise taxes and it would cap spending at unrealistically low levels.

House Speaker John Boehner called the measure "exactly the kind of 'balanced' approach the White House has asked for -- and another day was lost as we approached the deadline. (See, "The problem with Cut, Cap and Balance")

No. 4: Euphoria over Obama's embrace of the 'Gang of Six'

July 19, 2011

The stock market staged its strongest one-day rally of the year after President Obama indicated that lawmakers were closer to reaching an agreement on raising the debt ceiling. The Dow was up more than 200 points, or 1.6%.

The catalyst: A midday press conference in which President Obama threw support behind a compromise plan from the hobbled Gang of Six -- a bipartisan group of senators.

The plan was fine in concept, with a mix of spending cuts and tax reform. But it was nowhere near ready for the attention.

As former Treasury Secretary Larry Summers said: It's "more a plan to have a plan rather than a plan." And Sen. Dick Durbin, a member of the Gang of Six, said the plan is "not ready for prime time."

No. 5:The missed opportunity

December 15, 2010

The last time Republicans and Democrats really came together was last December, for an end-of-year package that extended unemployment benefits (something Democrats wanted) and the Bush tax cuts for everyone (something for Republicans), as well as other goodies.

With the Democrats solidly in control, Obama could have wrapped up the debt ceiling then. Alas, it didn't happen.

By the way, how much was everyone willing to add to the deficit just 7 months ago? $858 billionTo top of page

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