Debt Ceiling

by Bethany Hansen

As Congress and the president stall (again) in their debt ceiling talks, it reminds me once more that local and state governments do not have the luxury of raising their debt ceilings as easily as Congress does. It is rather an odd concept: essentially, being able to raise one’s own credit limit. I know that many, such as Ben Bernanke, argue that defaulting on our debt would be destructive to the economy, but what about the long-term consequences of creating more debt?

President Obama and others argue that by raising the debt ceiling now, he and Congress can deal with the short-term crisis and then they can focus on really tackling the debt and spending. Judging by the nature of democracy, that is a false assumption. No democratically-elected politician will want to cut anything without the immediate pressure of having to do so.

Some states and even cities have major debt problems (e.g., New York, California, New Jersey, to name just a few), and they have been saved the past two-ish years by handouts from the federal government. But now is the time when they are being forced to seriously make changes to their budgets—because they cannot do what Congress is now considering doing.

As public administrators, we can help to avoid dire financial circumstances by planning and spending conservatively, and by helping elected officials do so as well.

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