On March 16, 2006, when our national debt stood at $8.27 trillion, a young Senator from Illinois announced his intention to vote against raising our nation’s debt ceiling to $9 trillion, explaining:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. Leadership means that “the buck stops here.” Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better. I therefore intend to oppose the effort to increase America’s debt limit.

That Senator, of course, was Barack Obama. But now that President Obama is the leader, and now that our national debt stands at $14.01 trillion (a more than 70 percent increase from 2006), he is singing a different tune. His Treasury Secretary, Tim Geithner, sent a letter to Congress last week claiming that unless they raised the debt ceiling by “the end of the first quarter of 2011,” the “full faith and credit of the United States” would be “called into question” and there would be “catastrophic damage to the economy.”

This is, of course, completely false. The United States government will not default on its debt. Federal taxes will still be collected by the Treasury, from which interest and principal on the debt should be paid. The creditworthiness of the U.S. is not in danger. Just look at history. In the fall of 1995 the federal government reached its $4.9 trillion debt ceiling. Congress refused to raise it. The world did not end. Instead, Treasury took several measures during the period to raise funds to meet federal obligations without exceeding the debt ceiling. In March 1996, the debt ceiling was raised to $5.5 trillion. Was, as Geithner warns, the “full faith and credit of the United States …. called into question”? No. Was there “catastrophic damage to the economy”? No.

The Obama administration is creating a rushed atmosphere, but Members of Congress have time for full consideration and deliberation before making a decision on the debt limit and necessary spending cuts. Gross federal debt has reached $14 trillion. Ongoing deficit spending (projected at $1.4 trillion for 2011) means the ceiling of $14.29 trillion will initially be reached around mid-March. Treasury’s traditional financial toolbox and revenue surges in April and June should delay the final moment of reckoning to mid-May and possibly as late as July. There is time to take the correct actions on behalf of the American people.

The 112th Congress should remember these facts and refuse to be rushed by Obama Administration scare tactics on the debt ceiling issue.

So what should conservatives in the 112th Congress do about the debt ceiling? They must demand real, immediate, and significant cuts to federal spending. Any increase in the debt ceiling should be accompanied by immediate, substantial spending reductions. The Heritage Foundation’s Brian Riedl has identified $343 billion in cuts here. But even this is not enough. We also need strong new rules such as hard spending caps to require continued, sharp spending reduction in future years—thus putting the budget squarely on a path to fiscal responsibility through lower spending, taxes, and borrowing. Any increase to the debt ceiling without both immediate and long-term spending cuts is completely unacceptable.

Just yesterday, The Heritage Foundation released the 2011 Index of Economic Freedom which showed that the irresponsible spending habits of the last Congress had once again pushed the United States down the international ranking to #9, behind nations such as Denmark, Canada and first-place Hong Kong. The Index showed that runaway spending posed the greatest risk to our economic freedom, and thus our ability to reduce poverty and create economic growth. The U.S. can turn things around and continue to be a leader of this prosperous free world, but first we have to get our own bad spending habits under control. The debate over the debt ceiling provides the perfect opportunity to put us on this path.

We have time, there are options available, but action is necessary. Raising the debt ceiling, without also addressing our federal government’s spending problem, would be, as one Senator once said, “a sign of leadership failure.”

Quick Hits:

  • At the memorial service in Tucson, President Barack Obama deliberately rejected any link between conservative rhetoric and the shooting and added, “What we can’t do is use this tragedy as one more occasion to turn on one another.”
  • The lame duck Democratic Illinois legislature passed a 67 percent increase in the state income tax that will add $1,040 to the tax bill of a family of four earning $60,000 a year.
  • Taxpayers are unlikely to recover their $50 billion bailout of GM, according to a new federal panel report.
  • Banks seized more than a million U.S. homes last year, an all-time record.
  • The U.S. Circuit Court of Appeals for the District of Columbia ruled yesterday that the EPA can regulate carbon dioxide emissions from power plants in Texas.