The real problem beyond the debt ceiling dilemma

What can be done to avoid a similar showdown in the future?

The situation is one where we have to reduce our borrowing. We’re spending up to a trillion and a half more than what we’re taking in; that’s obviously not a sustainable path. The way you deal with that is to do one of two things: Find more revenue, or think of ways to reduce the growth in spending. We need to start doing this now, and even more seriously over the course of the next decade.

Hypothetically speaking, one way to do it – but one that we’re absolutely not about to do – is to cut spending by a trillion dollars. Stop and think about that for a moment: You’re talking about cutting 7 to 8 percent of the amount we’re spending in the whole country. That would be a catastrophic situation. Eventually, we have to get back into harmony with spending and taxation, but it’s not something we can do instantaneously.

To take a less extreme approach, people have said we could do some ad hoc measures – we could pay the bondholders first to keep our credit rating high and not cause a credit crisis, and then we could start selling assets and not pay our bills on time, things of that nature. Well, that’s the strategy the state of Illinois has been using for decades, and look at where it’s gotten us. So it’s not a reasonable long-term strategy.

The debt ceiling is a symptom of the problem, but it’s not the problem itself. If you want to really address the issue, you need to get at the cause, which is either spending or taxation. But it has to be done in a measured way over a period of time, not cold turkey.

To contact J. Fred Giertz, call 217-840-9148; email jgiertz@illinois.edu.