It is time to tear down the debt ceiling. Why? Nobody likes debt. It’s something many of us feel our government has way too much of and is piling up more all the time. A debt ceiling sounds like a good thing.
President Donald Trump told reporters recently that the debt ceiling may not be worth upholding. “For many years, people have been talking about getting rid of debt ceiling altogether, and there are a lot of good reasons to do that,” Trump said. “It complicates things, it’s really not necessary.”
Trump is right.
The debt ceiling was created in 1917 and has been revised many times since. Before the debt ceiling, Congress had to approve each government bond issue individually. With World War I, spending was moving faster than lawmakers could respond. The debt ceiling let Congress set a cap and the U.S. Treasury Department could borrow as needed until it hit the ceiling. It sounds like the limit on your credit card.
But it’s not.
The debt ceiling doesn’t keep us from spending. It’s more like going to dinner, eating your fill and then arguing about whether you should pay the bill. Congress sets the budget and appropriates money for the various operations of the federal government. It sets tax rates, tariffs and fees that determine how much money the federal government has on hand.
Later, when the money in and money out don’t match, the Treasury borrows money to keep the bills paid. When the amount borrowed nears the limit, Congress is asked to OK an increase in the ceiling or to suspend the limit so the U.S. can keep paying its bills. Congress routinely approves spending that will push us past the debt limit. In fact, lawmakers have done so 78 times since 1960, according to the U.S. Treasury website.
Instead of being a useful limit on government spending, the debt ceiling has become a recurring trap. It risks government shutdown and loss of credit rating while encouraging political posturing and brinkmanship. It has become a cudgel the minority tries to use to extract concessions at the risk of crashing the economy and ruining the U.S. credit rating.
Leaders and thinkers on both sides of the aisle have called for the debt ceiling’s elimination for years. In 1959, Marshall Robinson of the conservative Brookings Institution said, “The case against the debt ceiling is formidable. The record of recent years shows that it has: jeopardized long-run defense policy; interfered with compensatory measures during recession; hampered proper debt management policy; fostered budgetary subterfuge; increased the cost of financing the government. The debt ceiling is a disorderly defense against government spending.”
There is a workaround that has been used from time to time, the Gephardt rule, named for Rep. Richard Gephardt, D-Mo. Under the rule, the debt ceiling is raised at the same time the spending is set, bypassing the bluster and blather that comes with deciding to actually pay the bills after we have spent the money. That’s a good place to start. Fiscal discipline should be in the spending, not in the paying after the bills are incurred.