Can Republicans hold the debt ceiling and balance the budget?

Obama's veto of the budget resolution and no debt ceiling means a shutdown. Which way forward from here? Photo: AP

WASHINGTON, September 23, 2013 — The House issued a challenge to the Obama Administration this week. It passed a budget resolution that funds the government into December, but defunds Obama’s signature legislation, the Affordable Care Act.

The Senate won’t pass the House bill, nor will President Obama sign it. If a continuing resolution isn’t passed and signed by the start of Fiscal 2014 on October 1, the government may be forced to “shut down.”

SEE RELATED: John Boehner’s Obamacare victory dance

If Congress doesn’t raise the debt ceiling by mid-October, the government may again be forced to shut down. Treasury Secretary Jack Lew says that the Treasury will exhaust all its tricks to stay under the current debt ceiling within four weeks. 

The current jockying over spending and the debt ceiling have put the GOP under attack for risking the government’s credit. The two issues aren’t the same, but they are fundamentally linked. President Obama refuses to negotiate on the debt ceiling, and has said that he will not allow Republicans to tie it to the budget. 

The debt ceiling acts as a constraint on government debt. If Congress increases the debt ceiling too often or too easily, it sends a signal to investors that the government is unserious about controlling debt. The government’s credit and ability to service debt will eventually be impaired.

In order for Congress to prudently manage its debt, it must balance its budget. Refusing to raise the debt ceiling without balancing the budget is inconsistent with financial prudence. If Congress refuses to raise the ceiling without balancing the budget, it really will damage our national credit.

SEE RELATED: BREAKING: No Fed stimulus reduction for now. Stocks soar

It would be better for Congress to move the country to a balanced budget than to shut the government down by refusing to raise the debt ceiling. Shutting down the government through the debt ceiling may cut spending, for instance by eliminating funding for air traffic control, but it’s a blunderbuss rather than a knife. Rather than lopping off what we don’t need, it will put holes in everything. It is better to have a well thought out balanced budget that cuts out unnecessary spending, restrains entitlement, and promotes government efficiency.

House Speaker John Boehner has suggested that raising the debt ceiling be tied to spending cuts over the next ten years, the proposal that Obama has rejected. A better option might be to tie it to a change in the federal budget baseline. 

Under the Deficit Control Act of 1985, better known as “Graham-Rudman-Hollings” or “Graham-Rudman,” the budget baseline was set at the previous year’s budget, without any adjustments for inflation. In 1997 the act was amended to include not only inflation adjustments, but an additional 3 percent. This has allowed fiscal liberals to accuse fiscal conservatives of cutting the budget even when they allow it to grow faster than the pace of inflation. 

A return to the original Graham-Rudman baseline calculation would do more to bring the federal budget under control than the sequester, another element of Graham-Rudman. The sequester has slowed the rate of budget growth, but by less than would a return to the Graham-Rudman baseline. 

SEE RELATED: Obama tweets on House vote: “They actually did it!”

None of this is consistent with Obama’s desires. His interest is in eliminating the sequester and increasing spending beyond current levels. But at this point a break is essential, and even more essential than holding firm on the debt ceiling.

At some point the government must spend within its limits. It can continue to borrow in financial markets only as long as lenders are confident they will be repaid. The Fed’s decision to continue its program of quantitative easing — the creation of $85 billion per month out of thin air, which it uses to buy government bonds and mortgage-backed equities — is vastly expanding the pool of currency. With growing federal deficits, the markets will eventually believe that the pull of inflation is inevitable.

Lenders do not want to be repaid with inflated dollars. Governments are infamous for repaying lenders with inflated currency. Inflation is a tool used by functionally bankrupt governments to restructure their debt and impose a hidden tax increase on unsuspecting tax payers. Our government may be planning to pay for its continued deficits from an inflation tax. 

The alternative will be an actual tax increase. In a weak recovery, that will take money from the private sector that it can’t afford to lose. It will replace efficient private spending with inefficient public spending, reducing growth and raising unemployment.

Only 47 percent of adults in this country have a full-time job as it is. The fall in unemployment figures are due to people leaving the work force or finding part-time jobs. In this tepid economy, a tax hike is not a wise idea.

The budget must move back to balance. A continuing resolution that cuts spending and forces the budget baseline downward on the way to a true budget is a good way to get there. Refusal to raise the debt ceiling probably is not. And raising the debt ceiling while doing nothing to slow the growth of the budget will be the worst outcome of all. 


Read Armstrong Williams, author of the brand new book Reawakening Virtues, content and Come join the discussion live4-5p.m. est at or tune in 4-5 p.m est on S.C. WGCV, Sirius/XM Power 110, 6-7 p.m. and 5-6 a.m.est,

This article is the copyrighted property of the writer and Communities @ Written permission must be obtained before reprint in online or print media. REPRINTING TWTC CONTENT WITHOUT PERMISSION AND/OR PAYMENT IS THEFT AND PUNISHABLE BY LAW.

More from Armstrong Williams Right Side Wire
blog comments powered by Disqus
Armstrong Williams


Armstrong Williams is the Founder & CEO of the Graham Williams Group (GWG.) He is called “one of the most recognizable conservative voices in America” by The Washington Post. 
Williams is a pugnacious, provocative and principled voice for reawakening virtues in America’s public debates.

Contact Armstrong Williams


Please enable pop-ups to use this feature, don't worry you can always turn them off later.

Question of the Day
Photo Galleries
Popular Threads
Powered by Disqus