POLITICIANS DO some irresponsible things, but few could be more reckless than periodically fooling around with the “full faith and credit” of the United States.
The ironclad quality of the federal government’s debt, established over centuries, has made Treasury securities universally tradable; these “risk-free” assets undergird the global financial system. Every so often, Congress must refresh America’s credibility by extending the statutory limit on federal borrowing, thus removing even the smallest chance that the government will run out of cash and have to default on certain of its obligations.
Yet just as often, members of Congress and the executive branch say and do things to suggest a willingness to trifle with that responsibility; Republicans on Capitol Hill did so repeatedly during the Obama administration, seeking to attach otherwise unpassable spending cuts to debt-limit increases. Last month, White House budget director Mick Mulvaney publicly floated a similar approach, and National Economic Council Director Gary Cohn echoed him. This created confusion at a moment when the debt limit had already been technically exceeded and the Treasury Department was resorting to “special measures” to keep all of the financial balls in the air.
Fortunately, Treasury Secretary Steven Mnuchin has stepped forward to dispel any doubt. In congressional testimony Monday, he clarified two important points: First, a failure to increase the debt limit would not be a manageable nonevent but would “create a serious problem.” Second, though Treasury can indeed keep paying the bills through the summer, it would be far better to pass a bill well before August, and pass it cleanly — unencumbered by amendments.
Mr. Mnuchin’s words carried extra weight because President Trump, to his credit, had publicly empowered the secretary to speak for the administration on this point. Adult in the room, with respect to government debt, is a role Mr. Mnuchin has played for Mr. Trump before, most memorably during the 2016 campaign, when Mr. Trump suggested that the United States might reduce its debt by making a deal, a la Greece or Argentina. At that point, Mr. Mnuchin reassured everyone that “the government has to honor its debts.”
We’ll take Mr. Mnuchin’s apparent ascendance in the latest kerfuffle as a sign that the president is moving up the learning curve. The kerfuffle itself, though — repetitive and unnecessary as it is — reminds us that the system of adjusting the national credit-card limit is in need of reform. At the hearing, Mr. Mnuchin floated one idea, which would be for Congress to adopt additional borrowing authority in the same legislative act that calls for spending beyond the government’s means. “The debt ceiling should not be a Republican issue or a Democrat issue,” he said. “It should be an acknowledgment that we have spent the money and need to fund the government.”
This is the same conclusion all of Mr. Mnuchin’s predecessors and all previous Congresses have eventually reached, once those who saw political advantage in pretending otherwise had had their fun. It’s simple realism: Wouldn’t it be nice if the country could just write simple realism into law?