The Daily Caller

The Daily Caller
              President Barack Obama gestures while making a statement regarding the budget fight in Congress and foreign policy challenges, Friday, Sept. 27, 2013, in the James Brady Press Briefing Room of the White House in Washington. The president said the debt ceiling breach far worse than a government shutdown and would effectively shutter economy. (AP Photo/ Evan Vucci)

When a ceiling is not a ceiling

Photo of Hughey Newsome
Hughey Newsome
Advisory Council, Project 21

Over the coming days, be prepared for more discussions concerning the next debt ceiling crisis.

Last month, Treasury Secretary Jack Lew warned that the current pace of federal spending would require an increase in the debt ceiling. In a February 3 speech, Lew reiterated: “The bottom line is time is short.”

Expect the standard positions to be taken. One political party will likely warn of the need to address deficits, while the other will portray unwillingness to allow the government to continue spending as unpatriotic.

Unfortunately, the roles seem to switch depending on which party holds power. The one constant is that the national debt continues to grow as the movable debt ceiling continues to be increased.

It defies the definition of the term “ceiling.”

By now, conservatives can recite the numbers by heart. The national debt has risen to over $17 trillion. It’s increased over $6 trillion since Barack Obama took office. While these figures are important in judging this administration’s spending habits, it is the (gross) debt-to-gross domestic product (GDP) ratio that should alarm each and every citizen.

Economists use this ratio as a gauge of a nation’s fiscal health. For the United States, the International Monetary Fund (IMF) reported a ratio exceeding 106 percent at the end of the 2012 fiscal year. This means America owes more than what every man, woman or business produces each year — the GDP.

In that, the United States is doing just a bit better than Singapore, Grenada, and Ireland. In fact, of the 173 nations for which the IMF reported (gross) debt-to-GDP ratios, only ten have higher ratios.

Some may argue that credit agencies continue to rate U.S. debt as top-notch — so there’s no problem. It’s true that Moody’s and Fitch have never downgraded the rating of U.S. debt (even though they have both issued warnings), but Standard and Poor’s (S&P) did so in 2011 after that year’s debt ceiling fight.

Before the S&P downgrade, the United States enjoyed an AAA credit rating. Of the ten nations with higher debt-to-GDP ratios, only one had a AAA credit rating. Four had speculative — junk — credit ratings.

The decisions of the other credit rating agencies to maintain their good ratings may seem odd to some, considering America’s poor debt ratio. With that in mind, consider that S&P alone is now at the center of a Justice Department lawsuit for activities related to the financial crisis of 2008-2009.