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But because it exists, the debt ceiling has become a political tool that can be used, as it is now, to hold one’s political foes hostage.
Does that make sense?
Ezra Klein doesn’t think so. Writing on washingtonpost.com, he likes an idea briefly proposed two years ago by Republican Mitch McConnell, which would turn such decisions over to the president. He could raise the ceiling as he wishes unless Congress voted to stop him.
Because the president could veto any such attempt, Congress effectively would need a two-thirds majority to stop him.
McConnell’s original plan would have required the president to propose cuts that equal the increase in the ceiling, but that doesn’t matter much now as McConnell has abandoned the plan.
Klein argues the debt ceiling is dangerous. “If we crash through the debt ceiling, a global financial crisis could — and likely will — result. Even once we return to sanity and begin paying our bills again, America's borrowing costs are likely to be permanently higher, and the market's confidence in our political system is likely to be permanently harmed,” he wrote. He quoted other prominent financial experts who also would like to see the current ceiling gone. (Read the piece here.)
Speaking for the other side, American Enterprise Institute officials Kevin Hassett and Abby McCloskey wrote an op-ed in the Wall Street Journal that argues the current debt ceiling process serves “an important function.” (Read it here.)
First, they argue, it keeps lawmakers honest, forcing them to vote on something that at least acknowledges how they are spending money, rather than just increasing spending without any accountability.
Second, it can force lawmakers into action. “Since the consequences of government default are so severe, debt-limit legislation has always passed in the end, and it has often included important additional legislative accomplishments.”
Third, they argue the debt ceiling gives whichever party is in the minority an important bargaining chip that checks the power of the president.
That power would increase if the president were the sole decider on raising the ceiling, barring an almost impossible supermajority of lawmakers saying otherwise.
Before 1917, there was no debt ceiling. That’s because Congress personally approved the passage of every bond issuance. During WWI, Congress decided the president should be allowed to issue bonds on his own, but a ceiling was put in place to provide a sense of accountability and a guard against runaway spending.
Frankly, it still makes sense to have a limit in place that lawmakers have to physically vote to extend.
On a local level, this can be compared to a state law that requires city councils to call any plan to collect more revenue year over year a tax increase, even if the extra money comes in only because of inflation and property tax rates stay the same. The politicians have to sit through painful tax-hike public hearings and make a public vote.
Utah has such a law, and it has checked rising property tax rates quite well.
It’s true the United States would suffer immeasurably if it defaulted on its debts. From then on, debt would be much more expensive. Creditors would demand higher returns to make up for the risk of a future default. Credit worthiness is like innocence. Once you lose it, it’s gone.
And yet, the nation never has gone over that cliff. It has, however, increased spending over and over again. It seems to me that would just accelerate even more if Congress no longer had to pause to actually increase the limit.
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Jay Evensen is the Senior Editorial Columnist of the Deseret News. He has 32 years experience as a reporter, editor and editorial writer in Oklahoma, New York City, Las Vegas and Salt Lake City. He also has been an adjunct journalism professor at Brigham Young and Weber State universities.