Abolish the debt ceiling
Every so often, when the United States nears its debt limit, Congress decides to subject the world to the spectacle of US lawmakers and the president playing a risky game of poker, bluffing with the health of the US and global economies in the balance.
It’s an absurd political cycle that carries enormous risk and serves no sensible purpose. And yet, here we go again: If Congress doesn’t raise the debt ceiling soon — which caps how much money the federal government can borrow — the US government will default on its obligations sometime in the next few months. And Republicans, with their majority in the House, are using that risk as leverage to try to force President Biden to agree to spending cuts.
Republican House Speaker Kevin McCarthy recently announced his party’s conditions for agreeing to raise the debt limit, which include, among other things, spending cuts for health care, climate, and education programs, as well as capping the budget growth of any federal agency to a mere 1 percent per year. The White House has rightly refused to agree to those demands so far and has instead asked Congress to raise the debt ceiling with no strings attached.
If Republicans refuse to raise the debt ceiling, the economic consequences would range from bad to catastrophic, including wreaking havoc on the entire global financial system.
On the surface, it might sound like all Republicans are trying to do is use Congress’s power of the purse to impose some fiscal discipline. The problem, however, is that the debt limit is not the mechanism to do that. The money that the Biden administration is seeking to borrow is not for any new spending; it’s for expenditures that Congress itself has already committed the federal government to through the laws that it has passed over the years. If Republicans want to walk back the government’s financial commitments and actually cut spending, then they have to pass new legislation that does so rather than simply barring (or threatening to bar) the government from borrowing more money to pay for programs that many of them voted for themselves.
The reality is that this is an entirely unnecessary process, and Congress would be wise to do away with the debt ceiling altogether. In fact, that’s long overdue, and Democrats shortsightedly missed an opportunity to abolish the debt ceiling before handing over the House majority to the GOP. Indeed, last fall, Biden himself urged his party not to make any serious changes to the procedure, calling the idea of eliminating the debt ceiling “irresponsible.” But with a GOP that’s growing more and more extreme and reckless, the only thing that seems irresponsible in hindsight is allowing them, or anyone else for that matter, to hold the economy hostage while playing politics.
The reason the debt ceiling is neither necessary nor a source of fiscal discipline is because it’s not how Congress authorizes spending. Lawmakers do that through the legislation they pass, as they did recently with the Inflation Reduction Act or the bipartisan infrastructure law. All that the debt ceiling does is impose an arbitrary limit on how much debt the government is allowed to take on — a virtually meaningless procedure given that it does not change the fact that the government must pay the bills that Congress has already committed to paying.
Supporters of the debt limit might argue that its existence is worth the risks that come along with it, because it gives Congress a guideline for how much money it can or should commit to when coming up with budgets. But there are two reasons that’s misguided: First, history has shown that the arbitrary limit does not financially inhibit lawmakers from either party when they’re drafting policies. Second, imposing a limit requires a certain level of foresight that no one has. Disasters like the COVID pandemic or the Great Recession can always strike, and Congress will suddenly need to dramatically increase government spending at a moment’s notice regardless of what the limit it had previously imposed on borrowing money was.
On top of that, if Congress fails to raise the debt ceiling to allow the government to fulfill its obligations, the country would not only be dealing with an economic mess; it could very well be facing a constitutional crisis too. That’s because of the public debt clause of the 14th Amendment, which states that “the validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
While it’s not settled law, some legal scholars have argued that the public debt clause can be interpreted to mean that obstructing the government’s ability to pay its bills — failing to raise the debt ceiling, in other words — is unconstitutional. And so faced with that open legal question if Congress refuses to raise the debt ceiling, the Biden administration may be forced to make a choice depending on its own reading of the public debt clause: either allow Congress to violate the Constitution by obstructing the government from meeting its obligations or allow the executive branch to violate the Constitution by ignoring what Congress says in order to honor the 14th Amendment, meaning that the Treasury would continue borrowing and spending as it must. That’s a messy court battle that the country should avoid at all costs, in large part because a global financial crisis would likely ensue as the judicial process unfolds.
While it’s unlikely for this Congress, with its partisan acrimony, to abolish the debt ceiling, it’s what lawmakers should ultimately do the next time they have a chance. But for now, Biden should remain steadfast in ignoring McCarthy’s demands and pressure Republicans to fold. As Sharon Parrott, the president of the Center on Budget and Policy Priorities, a progressive think tank, said, the GOP’s plan would result in worsening poverty while providing “tax cuts for tax cheats,” all in exchange for lifting the debt ceiling just enough to last until 2024.
If the current threat of default coming from Republicans seems risky, imagine how much riskier this process would be in the middle of a presidential election. Reasonable lawmakers, including some Republicans, should put a stop to this poker game now.