The angst created by this ridiculous law is unneccessary, needless, and it should be repealed.
For those who think the debt ceiling mandate is some kind of Constitutional or traditional phenomena…it is not. For those who think it is a sacrosanct part of American history…they are wrong. In fact, it is dates from 1917; has no basis as a Constitutional component; and is a bit of an anachronism in terms of other industrialized nations. Few, if any have such an arbitrary limit on debt, and most have systems that are far more effective and less dangerous.
And why is our debt ceiling law dangerous? Precisely because of why, and what, is happening now. It is not being used to initiate rational fiscal policy – rather it is being used to hold hostage the nation’s legitimate debts to a far right agenda, mostly regarding taxation policy. And, it is a continuing potential threat to the full faith and credit of the United States, as long as it is on the books.
Moreover, the debt ceiling limit also is largely irrelevant, because until now it has always been voted and extended without serious confrontation and little discussion. That includes 30 times since 1980; and virtually every year that G.W. Bush was in office.
A quick history of the debt ceiling limit is in order. The Congressional Research Service describes our debt as follows:
“Total debt of the federal government can increase in two ways. First, debt
increases when the government sells debt to the public (often other countries). Second, debt increases when the federal government issues debt to certain government accounts, like Social Security and Medicare trust funds, in exchange for their reported surpluses. The sum of debt held by public and government accounts is the total federal debt.”
The statutory limit on federal debt began with the Second Liberty Bond Act of
1917, which helped finance the United States’ entry into World War I. By allowing
the Treasury to issue long-term Liberty Bonds, along with a debt ceiling, the federal government held down its interest costs. The government was still allowed to issue bonds for specific projects (like the Panama Canal) until1939, when Congress eliminated separate limits on bonds and on other types of debt, which created the first aggregate limit that covered nearly all public debt. Since then, however, the statutory debt limit was pretty much irrelevant and on cruise control…till it became a danger our country this year.
But the danger now goes beyond conservatives simply refusing any tax increases (at both the Federal and State level), the far right has also made demands on a variety of other issues -- abortion, gay rights, budget Amendments, and smaller government to name a few-- to allow passage of raising the debt ceiling. Thus, it has become an instrument of social and political change, for which it was never intended; and it is paralyzing effective governance of our country. As one political pundit recently said: “it’s like going to poker game and putting a revolver on the table”.
One vital organization that agrees with this position is Moody’s Rating Service. In a recent report, they noted: “The current wide divisions between the House of Representatives and the Obama administration over the debt limit creates a high level of uncertainty and causes us to raise our assessment of event risk,” (Emphasis mine). Those politicians, who complain that creating new jobs is exacerbated by “uncertainty” in this economy, should take notice.
Some conservative politicians have introduced legislation to legislate a quasi permanent debt ceiling with a Balanced Budget Amendment to the Constitution. Dan Coates, junior Senator from Indiana is one. In introducing such legislation he commented: “This vote represents a unique opportunity to right a wrong and begin restoring our fiscal house by making Congress accountable for its spending. If American families have to sacrifice to make ends meet, they should expect the same from their government.”
His comments are telling, for two reasons. First, the U.S. Government is not a “family” nor does it have any relationship to family finances. And secondly, if it did, I doubt would any family agree to have a “debt ceiling” placed upon it. It would make getting mortgages and buying cars virtually impossible.
A better answer lies in the way most other industrialized nations deal with their debt. Many other countries with a AAA credit rating (like the United States), include Germany, France, Switzerland, Britain, Canada and Australia – none of whom have arbitrary debt ceiling limits as we do. Their budgeting process is so simple and intelligent, it defies long description. They merely agree on a fiscal budget that will best serve their nation in the coming year.
Experts—including former Office of Budget and Management and Treasury officials, CBO analysts, and economists—have suggested replacing the debt ceiling with debt targets for lawmakers to work under, as used by other well run countries. Targets could be implemented by, for example, measuring debt in relation to the overall size of the economy, such as in a debt-to-GDP ratio, and taking into consideration whether the economy is in a period of expansion or contraction.
But, what is not needed at all is our current debt ceiling law. It has become irrelevant, and a tool of dangerous mischief, uncertainty, and needless political gamesmanship in our current fragile economic scene.