Policy Resource

Back to the Budget: New World, New Language

Jun 6, 2011

As we move into June, realization is dawning in Washington that the summer could be hotter than usual if negotiations over raising the debt ceiling aren’t successful.

Treasury Secretary Tim Geithner has said that by early August he will no longer be able to juggle federal funds to pay off U.S. loans coming due. Vice President Biden is still holding talks with Congressional leaders around meeting demands for spending cuts in exchange for votes to raise the borrowing limit. The fact that defaulting on our debt is even being contemplated is uncharted territory for everyone.

To find our way as deficit reduction talk swirls around Washington, infant-toddler advocates must learn a new language and think about protecting the interests of young children in different ways. The deficit unquestionably is a threat to future prosperity and needs to be addressed responsibly. Yet, children’s programs have contributed very little to the deficit, but are not universally exempt from its solutions. Whereas infant-toddler advocates normally focus on key programs that promote healthy development, now we must familiarize ourselves with the meaning and implications of terms such as “debt ceiling”, “global spending caps”, and “entitlement reform”.

The Baby Blog is launching a series of posts to help guide us through this strange new budget world. Over the next week, we will discuss some of these terms and how they may hold the key to our future ability to improve the ability of at-risk children to fulfill their potential. Today’s post focuses on why raising the debt ceiling is important for babies. Check back each day to learn about where federal spending goes, proposals to change the budget to automatically limit spending, reforms to entitlement and means-tested programs, and the no-man’s land of increasing revenues.

To help get you started, watch our latest budget policy video, then read about how our country’s need to finance its debt is being used to leverage big changes in funding for vulnerable Americans.

WHY RAISING THE DEBT CEILING IS IMPORTANT FOR BABIES

The “debt ceiling” is the shorthand term for the statutory limit on how much money the federal government can borrow. Every so often, as the amount the government has borrowed to pay its bills nears that limit, Congress must pass legislation to increase the limit—in other words, to raise the debt ceiling. The current debt ceiling was reached in May, although the Treasury Department has been moving funds around to stave off the final deadline until August.

While Members of Congress do not like to vote to raise the debt limit, these bills usually pass with little more than rhetorical opposition, because the consequences of not increasing the limit have always been unthinkable. The United States government would have to default on repayment of debts that are coming due, threatening the stability of financial markets and ruining the country’s ability to obtain credit.

Outside of the fact that having credit helps keep the country’s financial footing stable, debt-ceiling bills on their face have little to do with babies. This year is different. Legislation raising the debt ceiling must pass. Any must-pass bill can be used as a lever to extract a desired action in return for voting for the bill. The repeated Continuing Resolutions for fiscal year 2011, which had to pass to avoid a government shut-down, were used as levers to extract significant cuts in domestic discretionary funding.

The Budget Resolution endorsed by the House contains even more drastic spending reductions in both entitlement and discretionary programs that would affect programs for infants and toddlers for years to come. It also includes tax cuts to be paid for by some of the proposed spending cuts. The Senate is not likely to agree to the provisions in the House Budget Resolutions, which is not binding in any case.

The House would seem to be unable to force its taxation and deficit reduction approaches through the Senate—unless a lever presents itself. Because of the timing of the need for debt ceiling legislation and the fact that it must pass or dire consequences will result, the debt-ceiling bill becomes a potent lever to increase the activity around a deficit reduction agreement. In fact, the leverage of the looming debt-ceiling crisis has already spurred President Obama to respond to the House proposal with his own plan to reduce the deficit and raised the stakes of Senate efforts to produce a plan as well.

Why is raising the debt ceiling so important to babies? Because it could be used to leverage major changes in the structure of federal spending that, if Congress and the President do not agree that children’s services should be protected, could severely limit the supports for all aspects of the development of at-risk children and limit their potential to become productive workers and citizens.

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