image title

Raising the roof on the debt ceiling

May 12, 2023

ASU economist says brinksmanship over national debt will continue due to politics, tax demonization

Since 1960, Congress has raised the ceiling 78 times to extend or revise our nation’s debt.

The fight is on again, this time on President Joe Biden’s doorstep. For the past few weeks, he’s been jousting with top lawmakers, who are pushing for various reforms and spending cuts before they approve raising the debt ceiling again.

The nation’s government debt of $31.4 trillion will have to be raised for the 79th time to avoid default. Republican and Democrat leaders both acknowledge they are nowhere near striking a deal, even postponing talks on May 12 to the following week, such is the gap in their negotiations.

In addition to the amount of debt to agree on, the two sides must also decide how long to push out the next debt ceiling decision. Biden and Democrats are looking for a two-year window, so it won’t impact the 2024 election, while Republicans are negotiating for more significant spending cuts and caps from their colleagues.

Sound complicated? It isn’t, said an Arizona State University economist. He said it is more political theater than real-life drama.

Dennis Hoffman, director of the L. William Seidman Research Institute at the W. P. Carey School of Business and director of ASU's Office of the University Economist, provided a few answers for ASU News as the two sides continue to negotiate.

Note: Answers have been lightly edited for length and clarity.

Man in black suit smiling

Dennis L. Hoffman

Question: What is government debt? How does it differ from personal/household debt? 

Answer: It represents financial obligations made by the government on behalf of U.S. taxpayers. Household debt is the obligation of individual households.

Q: Congress seems to have this debate every couple of years and has voted to increase the debt limit 78 times in its history. What is different this time? 

A: People in the opposition party often choose to make political theater out of this exercise.

Q: What is the difference between a debt default and a government shutdown? 

A: It’s apples and oranges. Actual default sends the message to creditors, and the debt of the United States government is no longer secured, or at least it is at risk of no payment. A government shutdown means that some recipients of government payments will no longer receive them, and many government workers and businesses working for the government won’t get paid. This has long-term implications for credit ratings and the cost of borrowing.

Q: Are there economically viable paths toward avoiding a debt limit increase? 

A: Not in the short run, but in the long run, the limit increases could be slowed. This language is from the U.S. Treasury website: “Congress has always acted when called upon to raise the debt limit. Since 1960, Congress has acted 78 separate times to permanently raise, temporarily extend or revise the definition of the debt limit — 49 times under Republican presidents and 29 times under Democratic presidents. Congressional leaders in both parties have recognized that this is necessary."

Q: Anything else you want to add to this discussion?

A: Few people talk about the U.S. debt in a historical context. Looking back to the nation's founding, the pace of borrowing and hence accelerated debt accumulation tended to increase during times of stress, including wars and economic depressions. You can see spikes in the debt-to-GDP ratio dating back to the War of 1812. During more tranquil times, the debt-to-GDP ratio fell. Why? Because historically, in normal times, the pace of deficits (spending exceeding taxes) was slower than the pace of overall economic expansion.

The debt-to-GDP ratio can fall if the economy grows faster than the pace of debt accumulation. During these episodes, the times debt limits need to be increased can slow.

More recently, the pace of debt accumulation has accelerated. Since 1980 or so, we have lost our political will to do what’s necessary to reduce the pace of debt accumulation. Since 1980, tax collections, and taxes in general, have been demonized. When we fight a war — let’s say the war in Iraq, the war on terror — no new taxes are imposed, nor existing programs are cut to pay for it. When Medicare is expanded, no new taxes are imposed to pay for it, and no new current programs are eliminated. When we pay out massive pandemic subsidies, no new taxes are imposed nor programs to pay for it. 

So, if there is no political will to manage the government’s fiscal situation over time, we will repeatedly have debt ceiling debates. This is a purely political problem with significant potential economic consequences.

Top photo illustration courtesy of iStock/Getty images

Reporter , ASU News


Strategic partnerships help fuel workforce readiness for ASU students

Two Class of 2023 students illustrate the benefits of university partnerships with leading technology companies

May 12, 2023

As about 20,000 spring Arizona State University graduates consider their next steps, many will be joining the workforce. 

One way ASU graduates are prepared is through strategic partnerships with industry giants. Spring ASU graduates Sushmitha Reddy (left) and Aira Daniella San Agustin worked directly with technology organizations while earning their degrees, thanks to Enterprise Technology partnerships. Photo by Mike Sanchez/ASU Enterprise Technology Download Full Image

With support from Enterprise Technology, partnerships with leading technology organizations — like Zoom, Amazon Web Services (AWS), Verizon and Cox — create real-world work projects and provide skills and internship experiences. These opportunities are key, as jobs in technology are projected to grow at nearly twice the national jobs rate over the next decade. 

Meet two Class of 2023 students who illustrate the benefits of university partnerships with these companies.

Sushmitha Reddy

Two years ago, Sushmitha Reddy took her first walk on the Tempe campus, joining the Sun Devil community as a graduate student studying information technology at the Ira A. Fulton Schools of Engineering. With a goal to become a software engineer, Reddy also wanted to explore work options to complement her studies. 

She joined the ASU Smart City Cloud Innovation Center, powered by AWS in fall 2022. Known as “the CIC” around campus, the team of ASU students and AWS employees leverage Amazon’s innovation processes, cloud expertise and global solution platforms to solve pressing community and regional challenges — with students driving projects forward. 

Alongside a team of student workers, Reddy had the chance to work on projects with local organizations. For example, building off a project underway with the Phoenix Police Department, Reddy helped apply smart technology solutions in machine learning to determine greater gunshot detection. Taking lessons from the classroom, Reddy applied her classroom knowledge in her role at the CIC as a cloud developer tasked with managing the backend architecture in AWS cloud storage for machine learning models. 

“Sushmitha brought a willingness to learn and to apply her classroom knowledge to her projects at the CIC,” said Ryan Hendrix, general manager of the CIC. “We appreciate the contributions of students like Sushmitha, who go above and beyond to apply Amazon best practices to address local challenges using technology and collaboration.”

Reddy said she recognizes that the technical and communication skills, as well as the confidence she's gained during her experience at the CIC, are desirable to future employers.

“My entire resume is filled with job experience and projects from the CIC,” Reddy said. 

Just this week, Reddy walked the graduation stage, with her degree and two job offers in hand.

Aira Daniella San Agustin

Aira Daniella San Agustin is a fellow student at the Fulton Schools. Majoring in computer science, San Agustin is part of ASU’s Accelerated Program (4+1), earning both her bachelor’s and master’s degrees in under five years. Her planned graduation date is in December.

Like Reddy, San Agustin wanted to take advantage of the employment opportunities and joined Learning Futures — part of Enterprise Technology —  in summer 2021. She was looking to gain experience in coding and immersive technologies.

In fall 2022, the university announced a first-of-its kind partnership with Zoom. The Zoom Innovation Lab at ASU is a five-year strategic pairing combining resources available across the university — including expertise, research, networks and learning assets — with Zoom’s technology and talent to create solutions that better connect society. 

At the lab's launch, projects were already underway across campus. One solution included the development of the ASUniverse, a digital replica of the Tempe campus that brings ASU into the metaverse. Tasked with bringing Zoom functionality into the ASUniverse, San Agustin and teammate Delena Hoang took on the challenge. 

As creative developers, both San Agustin and Hoang began exploring the integration of Zoom’s collaboration tool with Unity, the game engine powering the university’s digital twin. They closely reviewed technical documentation made available to them by Zoom, and brought Zoom functions — like joining a meeting or toggling a video on/off — into the Unity environment. 

San Agustin noted she gained new skills, like translating code languages, that built off her classroom knowledge.

“We worked directly with Zoom developers to understand how we could leverage existing wrappers to translate C++ into C-Sharp,” San Agustin This was required to bring Zoom’s software development kit, written in C++, into Unity’s code base, written in C-Sharp. 

Integrating Zoom into Unity was just the start. A few weeks after the project concluded, a group of ASU students participated in a hackathon, where they explored real-world use cases of Zoom in the metaverse. To do so, they used the Zoom and Unity integration, as well as the technical documentation San Agustin and her teammate created. 

San Agustin is currently working at the Meteor Studio at ASU and will intern this summer for a leading web hosting company. 

Fueling innovation and workforce readiness

The 56% of students who complete an internship in the U.S. accept full-time job offers after they graduate. That’s a compelling statistic for students looking to transition to the workforce. 

Companies also benefit from working with students and learners, who bring extensive education and experience to bring valuable perspective and knowledge to projects and initiatives. 

“When developing these strategic partnerships, ASU students are central to our decision making,” said Lev Gonick, ASU’s chief information officer and executive sponsor for partnerships at Enterprise Technology. “We value our partnerships with top-performing technology companies to give our students the chance to collaborate with and learn from the best in the field, and to make sure that our partners are able to gain knowledge and inspiration from today’s forward-thinking learners.

"It’s exciting to provide these work opportunities to future technologists who will go on to advance technology across the globe for years to come.”

Written by Stephanie King

Kevin Pirehpour

Editorial Specialist, Enterprise Technology