Sometime today, Monday, May 16, the the United States' debt will reach $14.294 trillion, which is our legal limit. A single dollar borrowed in excess of the limit, or debt ceiling, would be illegal. A single dollar not paid on time to foreign creditors would be default.
But Debt Ceiling Day in America doesn't feel so apocalyptic, does it? There is no sign of teeth-gnashing in the international markets. As I write these words, the Dow is up about 25 points. The House of Representative isn't even in session.
This moment of calm is brought to you by the U.S. Treasury. But it is truly a moment, and not much more. The government is prepared to delay the reckoning of the debt ceiling with a series of maneuvers explained by this handy Wall Street Journal chart below. But in eleven weeks, we'll be back on the verge of default.
Some Washington experts think they've got a plan to force a deal. It's called Save-Go. I'd describe Save-Go as an insurance plan for broad-based deficit reduction. If Congress doesn't make the necessary changes to spending and revenue, Save-Go would automatically cut spending and raise revenue. The architects of Save-Go, Alice Rivlin and Pete Domenici, describe it this way:
Save-go requires that Congress achieve specific, annual dollar amounts of budget savings in each of three categories: discretionary (domestic and defense) spending, health-care spending, and other entitlement spending plus revenue. If, for example, Congress cut $4 trillion from projected future deficits over a 10-year period, legislation would have to be altered to hit year-by-year savings targets in each category, in total adding up to the $4 trillion.
But if Congress failed to meet the yearly targets in any of the three buckets, a trigger would be pulled. If the discretionary spending target were missed in any year, domestic and defense spending would face automatic, across-the-board cuts. If the health-care target were missed, health programs would be cut across the board. If the target for other entitlement spending and revenue were missed, other entitlements (including Social Security) would be cut and tax expenditures -- the loopholes that are really "spending through the tax code" -- would be cut or other revenue increased.
Rivlin and Domenici call their plan a "sword of Damocles" hanging over the heads of our electeds to force deficit reduction. Threats are a fine way to spring Congress into action, but then again ... the debt ceiling itself was supposed to be a sword of Damocles. The only reason to create a legal limit to your debt is to hope that Congress will use the opportunity to rethink its budget. The fact that our debt ceiling is $14 trillion off the ground is a good indication that this particular sword of Democles isn't having its intended effect.
When Congress doesn't trust itself to make good decisions -- which is a regular, if not permanent, feature of Congress -- our electeds create failsafes like the debt ceiling and PAYGO to force future Congresses to make better decisions.
Save-Go might be a good idea. But it belongs to a genus of Damoclesian rules that haven't done much to improve the behavior of Congress today.