Fiscal Follies: The Debt Ceiling and the 48 Percent Solution

The Defense Department is just the first casualty. There would be no federal money for public schools, college loans, highways, the Centers for Disease Control or just about anything else most of us expect from government.
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With the debate over the nation's debt ceiling continuing to rage, research conducted by our organization, Public Agenda, shows a real chasm between Washington and the rest of the country. Two-thirds of Washington leaders say we need to raise the debt limit, while surveys of the public show that most Americans continue to oppose it.

But there is a crucial detail in the public opinion polls that is not getting the attention it deserves. When the Washington Post and Pew Research Center surveyed Americans about raising the debt ceiling, nearly half of Americans (48 percent) admitted that they didn't have a good understanding of what would happen if the government didn't raise the debt limit. When that many citizens freely acknowledge that they don't have a solid grasp of the risks to the country if the debt ceiling deal-making goes south, that's a wake-up call for leadership. Real leadership, that is, that's focused on the best interests of the country as opposed an obsession with elections and politics.

There are times when elected officials should follow public opinion and pay careful attention to the public's concerns and priorities. And there are times when elected officials need to lead -- they need to be stewards for the country's future. When public understanding is limited, when people don't grasp the consequences of a major governmental decision, the time for genuine leadership has come.

Technically, the United States passed the $14.3 trillion debt limit earlier in May, and now the federal government can't borrow any more money until Congress raises the limit. Thanks to some clever accounting at the Treasury, the government can keep going until Aug 2, but at that point, the government wouldn't have enough money to cover its bills.

Douglas Holtz-Eakin, a former director of the Congressional Budget Office, has a low-tech, but riveting 60-second version of what it would really mean up on YouTube. The country would have money coming in. After all, we'll all still have taxes withheld from every paycheck. But what's coming in would only cover about 60 percent of our expenses, which wouldn't be enough to cover even what most Americans consider a very "small government."

We have to at least pay the interest on the debt, otherwise we'll risk unleashing an unpredictable, perhaps uncontrollable meltdown in the international bond markets. (We may not be safe from financial disruptions even if we pay the interest.) Once we've done that, there's simply not enough money to go around. We wouldn't have enough money to cover all the bills for Social Security, Medicare and Medicaid, although surely we'd use what is left of the country's revenues to pay a good chunk of each one. The real problem comes later; after paying for interest and entitlement spending, there won't be any money left for anything else. As Holtz-Eakin puts it, "no money for the troops, no money for procurement or transportation of materials." And the Defense Department is just the first casualty. There would be no federal money for public schools, college loans, highways, the Centers for Disease Control or just about anything else most of us expect from government.

The truth is that most Americans just don't realize what not raising the debt ceiling really means. Former President Bill Clinton may have hit on something when asked why polls showed opposition to raising the ceiling at the Fiscal Summit sponsored by the Peterson Foundation this week. "Because they've never lived through it," he said. "No one knows what will happen."

It is true that another common element of leadership is to use a deadline and potential crisis to force a balky group of people to sit down and get a solid deal done. One reason why the debate in Congress is stalled is because many political leaders see the debt ceiling as an opportunity to force change in the federal budget -- change that surely has to come. If we actually get sensible, practical change as a result, then we can give our leaders credit for doing their job. If they get an attack of bipartisanship and willingness to compromise, we might even be able to give them credit for a job well done.

But if elected officials in Washington allow the United States to slide into a potential economic disaster by blindly following what they think the polls are telling them, then history will heap on them the censure and condemnation they will so richly deserve. Indeed, the American people themselves may take a different view once the results of the decision become evident.

If they think that voters are going to reward them for putting the entire country through the wringer, they're likely to be very disappointed.

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