The Senate will vote soon on legislation to raise the ceiling on the national debt to nearly $10 trillion. This action is imperative as the statutory limit of $8.965 trillion on the United States' level of public debt will be reached by Oct. 1, according to Treasury Secretary Henry Paulson. The national debt, which has increased 40 percent during the Bush presidency, is the total accumulation of annual budget deficits. If the debt limit is not increased, the U.S. Treasury would be unable to pay interest on existing notes and bonds or borrow more funds needed to keep the federal government operating. The United States has never defaulted on a single debt payment. On Sept. 12, the Senate Finance Committee approved a bill to increase the debt limit by $850 billion, to a total of $9.815 trillion. The bill will now move to the Senate floor, where adoption is almost assured. Despite this assurance, there may be a lack of debate on why the United States must continue to take on increasing levels of debt. The last time the statutory debt limit was increased, in March 2006, the Senate debate was strictly partisan and the vote was close to party-line, 52-48, with all Democrats and only three Republicans voting against the measure. This time around, the situation will likely be reversed, with Democrats supporting the increase and Republicans voting against it. But the issues involved in raising the debt ceiling are serious ones that transcend party politics. Policymakers have debated for decades the relative merits of deficit financing in a macroeconomic context, focusing mostly on the trade-offs involved in incurring debt to stimulate the economy and what is the optimal or acceptable level of national debt as a percentage of GDP. Largely absent from debates about the national debt, especially congressional ones, are dynamic considerations such as the impact on interest expenses of policies that add to the national debt, trade-offs involved in long- versus short-term budget commitments, and the necessity or merits of extending the Bush tax cuts. Some voices in the debt and deficit debate this year are bringing overdue attention to the larger questions of long-term budget priorities and how dynamic analysis can illuminate the costs involved. For example, Sen. Tom Coburn (R-OK) told Senate Minority Leader Mitch McConnell (R-KY) last week:

Congress should be required to make the same difficult choices about financial priorities that are made every day by American families. It's no wonder that only 11 percent of the American public has a positive view of Congress... The debate over whether to increase the debt limit provides Congress with yet another opportunity to show American taxpayers that it has the courage to make tough decisions about spending priorities.

In testimony before the House Ways and Means Committee on Sept. 6, Jason Furman of the Brookings Institution brought these questions into greater focus:

Although some of these financing costs will likely fall on future generations, many of them will fall on the exact same households that receive the tax cuts today. For example, a person might get a $500 tax cut today but lose $700 in present value terms in future Medicare benefits. It is common in dynamic analysis to explicitly specify how tax cuts are financed in order to calculate the impact of the tax cuts on economic performance. These same financing assumptions have major implications for the distribution of the tax cuts that should also be presented in these analyses.

Setting aside the differences in these perspectives — Coburn would address the debt by spending reductions, while Furman looks at the effects of tax cuts — they both support an analysis which the Joint Committee on Taxation (JCT) and the Congressional Budget Office (CBO) might do well to perform when they "score" legislative tax and spending proposals: an analysis of the impact of a given proposal on the national debt, estimating the additional interest expense to the federal government if proposals are deficit financed, and also any benefits to the country over the long-term due to the investment. For example, a proposal to invest an additional $100 billion over ten years on rebuilding the nation's infrastructure might obviate emergency spending for repairs during that period that could end up costing more in the long-run if not spent on preventative measures. In Furman's example about tax cuts, a deficit-financed tax cut may not appear as attractive when policymakers realize families will end up paying more in the long run than they will receive in a tax cut. Requiring such a deficit impact analysis by the JCT (in the case of tax proposals) and CBO (for spending proposals) would help policymakers make comprehensive assessments of tax and spending proposals and facilitate efforts to set national priorities. If successful, it may also have the long-term impact of fewer increases to the national debt ceiling.