End the debt limit lunacy
For a generation, lawmakers have periodically engaged in a ridiculous — and very risky — charade of threatening to default on the nation’s debts. And here we are again, with a cadre of hard-right House Republicans holding our economic health and international reputation hostage.
Their leverage is an ancient and archaic process: The debt ceiling, adopted over a century ago, limits by law the amount of money the federal government can borrow to pay bills it has already incurred. That limit will be reached around June 1, and Republicans refuse to raise it unless Democrats agree to massive and damaging cuts in federal spending.
This is simply a terrible way to do the country’s business. No matter how the current crisis is eventually resolved, the lesson is clear: It’s time for Congress to make major changes in how that business is conducted. Either eliminate the debt ceiling entirely, or change the way it’s adjusted. The current system is too dangerous and too vulnerable to political terrorism.
The mere threat of a default — let alone the real thing — corrodes America’s credit rating, undermines global confidence in the stability of the dollar and shifts the economy closer to a recession. Our enemies abroad, starting with China, are desperately hoping for just such a selfinflicted fiscal calamity.
Sen. Brian Schatz, a Hawaii Democrat who advocates an end to the debt ceiling dance, told the Washington Post, “I just always thought this was the stupidest thing we do, and we do a fair number of stupid things.”
His view is widely shared by economists across the board. Douglas Holtz-Eakin, a former adviser to President Bush 41, described the debt ceiling to the CBC: “I don’t think there’s any reason to have it exist anymore.” Larry Summers, Treasury Secretary under President Obama, told CNN, “I just think this is a foolish exercise. I hope it ends as soon as it possibly can.”
Even Donald Trump, when he had responsibility for the economy in 2017, admitted, “For many years, people have been talking about getting rid of (the) debt ceiling altogether, and there are a lot of good reasons to do that.”
So why doesn’t it happen? For one thing, lawmakers have short attention spans. “Any time the debt ceiling issue arises ... there will be a lot of attention and a lot of talk about it. People will say, ‘Yes, we need to reform it,’” Rep. Brendan Boyle of Pennsylvania, the top Democrat on the House Budget Committee, observed in the Post. “But the moment the debt ceiling is raised ... people immediately forget it and move on to the next big thing.”
And when they do pay attention, they can be easily intimidated. Voting to eliminate the debt ceiling, they fear, can be turned into a charge of wasteful government spending. “A lot of people want this to happen but are worried about how it would look, or how difficult it would be to explain,” says Schatz.
Still, this is a debate worth having, and a bit of history is in order. Before 1917, Congress authorized borrowing on a case-by-case basis, but the fiscal demands of World War I forced a change, and the debt limit system was established. It has been raised countless times since then — more than 90 instances in the 20th century alone — usually without rancor or even notice.
But as Congress has become more polarized, as mutual respect among lawmakers has dwindled, as sources of information have fragmented and ideological factions have grown in power, the consensus has cracked apart and the debt limit has become one more weapon in Washington’s increasingly acrimonious and apparently endless warfare.
This new political climate demands change. The weapon has to be defused. There’s a reason only one other modern democracy, Denmark, even has a debt limit, and eliminating the process entirely would be the cleanest and most effective reform — but there are other options.
Under one proposal, the Treasury Secretary would have the power to raise the limit unilaterally. Under another, once favored by Sen. Mitch McConnell, the Senate Republican leader, the president would have the responsibility for increasing borrowing authority and Congress would have the right to override the action. A third change would restore a rule, which kept the peace for 16 years between 1979 and 1995, under which Congress automatically raised the debt ceiling when it passed its annual budget.
Any of these innovations would improve on the incendiary instability we have today. Is Congress likely to act? No. Should they? Absolutely yes.