Last week the Treasury Department announced that the federal government will need to increase its borrowing limit by November 5th in order to pay its debts. H.R. 3442, the Debt Management and Fiscal Responsibility Act, introduced by Kenny Marchant (R-TX), is an attempt to promote fiscal responsibility by increasing transparency and accountability in the debt limit process. This legislation requires that whenever the debt limit is increased, the Treasury Secretary must present a report outlining what macroeconomic impacts will result from raising the debt limit and the administration must present short-term, medium-term, and long-term deficit reduction strategies. The Secretary must also address the impact that an increase in debt will have on future government spending, debt service, and the position of the U.S. dollar as the international reserve currency. These reports would be made public on the Treasury website.
The CBO has estimated that the bill would cost less than $500,000 over the next four years, a number that would be allocated in the regular appropriations process, and ideally, offset with cuts elsewhere.
The national debt stands at 18 trillion dollars and rising. Such a large debt burden has wide-ranging consequences, yet we know the current debt limit process has largely failed to restrain spending overall. Since the modern budgeting process was created by Congressional Budget and Impoundment Control Act of 1974, the national debt has grown from $0.475 trillion to $18 trillion. The uncertainty created by debt limit standoffs can decrease investment and development of capital goods. Further, this lack of investment weakens economic growth and increases unemployment. While politicians have been able to force some reforms — most notably, the Budget Control Act of 2011 — during debt limit standoffs, these fights also come along with severe risks, and the long-term consequences of continued hikes can often be forgotten.
H.R. 3442 could potentially increase accountability and discipline, creating a culture in which politicians are forced to consider the negative consequences of rising debt. Speaking about the effort, Representative Marchant said, “The national debt is a shared responsibility, and it will take a shared executive-legislative approach to stabilize and reduce the nation’s debt. We can’t afford to put the $18 trillion debt on auto-pilot any longer. Let’s deal with it head on.”
While the potential for increased costs, however minor, is a concern for fiscal conservatives, it is encouraging to see efforts aimed at larger-scale process reforms to the debt limit began to take shape in Congress.
Note: This post originally appeared at the Institute to Reduce Spending.