Like passengers trapped in a car speeding toward a brick wall, the public is a forlorn spectator as the federal government careens toward a devastating default on its obligations. Already partially shut down, the government will be unable to pay all the nation's bills in just two short weeks unless Congress raises the debt ceiling. So far, no one has been willing to hit the brakes or steer clear of disaster.
U.S. Treasury Secretary Jack Lew said Thursday that default would be unprecedented and potentially catastrophic: Credit markets could freeze, the dollar could plummet, interest rates could skyrocket and precipitate another financial crisis and recession. Christine Lagarde, Managing Director of the International Monetary Fund said default could damage the entire global economy.
Congressional leaders and President Barack Obama say they want to avoid default. But as difficult as that will be, merely dodging this calamity won't be enough. Any deal worth striking has to include significant changes in how Congress handles budgets and borrowing that would make a repeat of this impasse a lot less likely.
Congress has driven the nation into similar straits too often in recent years. An eleventh-hour deal to raise the debt ceiling and cut spending in 2011 narrowly avoided default, but the nation's credit rating was downgraded. That deal also precipitated the "fiscal cliff" crisis the following year, when spending cuts the agreement stipulated were slated to hit simultaneously with big tax increases, again threatening to sabotage the nation's tenuous economic recovery.
Perhaps every time Congress approves a spending plan it should be required to include authorization to raise the debt ceiling enough to fund it. That wouldn't eliminate the potential for similar crises, but it should push Congress to return to a more orderly budgeting process. And it could spare the public sequels to this hair-raising ride.