Why Do We Even Have A Debt Ceiling Law?
Based on its history, the debt ceiling law may be the most pointless statute in the entire U.S. Code.
It’s been remarked here at OTB several times by myself and other contributors that the existence of a law placing a limit on the national debt, which then must be amended every time government borrowing approaches the limit, a vote which nobody likes and everybody demagogues, is fundamentally silly. It’s worth noting, though, that we have not always had a debt ceiling, in fact we didn’t have one until 1917, and the reasons for it coming to existence are fairly interesting:
The debt ceiling was first enacted in 1917. Why? The date tells all: we were about to enter the Great War. To fund that effort, the Wilson government needed to issue Liberty Bonds. This was controversial, and the debt ceiling was cover, passed to reassure the rubes that Congress would be “responsible” even while the country went to war. It was, from the beginning, an exercise in bad faith and has remained so every single second to the present day.
To understand the truth of that statement, one merely needs to look at this chart of how the debt limit has increased over the 94 years of its existence:
At no time has the debt ceiling acted to restrain either Federal spending or Federal borrowing. Moreover, during the 30 year period from the late 1970s to today, the debt ceiling was routinely increased at least once every two years as we racked up more debt than we’d ever had in the previous 200 years of the Republic. The debt ceiling has served, instead, as a way for Congress to pretend that it is being responsible, at the same time that it shirks its Constitutional duty:
Congress already controls the purse-strings, so if Congress would like us to stop borrowing money, then CONGRESS SHOULD STOP F***ING SPENDING MORE MONEY THAN WE TAKE IN. It’s as simple as that. Having this additional, superfluous “debt limit” accomplishes nothing except to give Congresscritters an opportunity for consequence-free political grandstanding. And why wouldn’t they grandstand? There’s no disincentive. The public at large, in all its ignorant glory, fails to demand either spending cuts (except in the abstract) or tax hikes, yet always opposes “raising the debt limit,” even though raising the debt limit is not a policy decision, it’s a math problem — one whose parameters are 100% determined by taxing and spending decisions that are already long made by the time the debt limit “issue” comes up for a vote. But the public doesn’t care about this. The public loves spending and hates revenue, but also hates debt. So of course the politicians grandstand!
George Will put it succinctly several months ago:
I know of no other developed nation that has a debt ceiling. This is a purely recurring symbolic vote to make people feel good by voting against it.
The trouble is it’s suicidal if you should happen to miscalculate and have all kinds of people voting against it as a symbolic vote and turn out to be a majority. Because if the United States defaults on its sovereign debt, the markets will be — well, it will be stimulating.
There is nothing in the Constitution that requires that such a limit exist and, as noted above, Congress already has all of the necessary power to tax and spend to allow it to control the budget. Until they’re willing to take the steps to do that, the debt ceiling law is at best pointless, and at worst suicidal.
I understand the point being made, but its the same concept of bank loan covenants: covenants can’t prevent a default, and it doesn’t mean the bank will accelerate the loan if they are violated………but it forces people to come to the table and debate.
Not to defend the debt ceiling statute (I think it’s absurd) but I think you have more confidence in the U. S. Code than I do. I think it’s riddled with pointless statutes.
@Drew:
Not it really doesn’t do that. We’re not even having a serious discussion this time. Both parties are being led by the nose by their respective bases and its all about scoring ideological points rather than doing what needs to be done.
Also, its worth noting that analogies that compare this situation to a consumer or business loan really aren’t apt. The United States is a sovereign. It can issue its own currency and its own debt. That is a very different situation from what any individual or business faces.
@Dave Schuler:
You do have a point, I admit
With a government premised uniquely on separation of powers, I don’t expect Congress to give up the power to create debt without conditions; perhaps not an absolute debt limit, but something. One of the advantages here is that the debt limit bypasses the pork committees and provides an opportunity to address budget issues that don’t get addressed in the appropriations process. In Defense of the Debt Limit
Doug,
“Both parties are being led by the nose by their respective bases and its all about scoring ideological points rather than doing what needs to be done.”
At some point even you will realize how hackish your “pox on both houses” attitude is. However, I’m not holding my breath for you to explain how a Democratic President who is willing to cut hundreds of billions from entitlements, reduce the benefit increases for Social Security recipients, and not increase tax rates, even on the upper income levels (all of which poll poorly among all Americans, not just the liberal base) is being led by the nose by his base.
Doug –
“Not it really doesn’t do that. We’re not even having a serious discussion this time.”
Political discussions are sometimes (some, like me, would suggest often) absurd, but we are having a national debate. Its in the news rather than something done without notice in the dead of night. That’s my point.
“Also, its worth noting that analogies that compare this situation to a consumer or business loan really aren’t apt. The United States is a sovereign. It can issue its own currency and its own debt. That is a very different situation from what any individual or business faces.”
Of course it can issue debt, until it can’t. Not bt law, but because of political or economic consequences. And that’s one of the few substantive elements of the current debate. When is enough enough?? BTW – if you’ve ever been in loan workout meeting they can be pretty absurd as well.
The question is moot. If that chart doesn’t scare the hell out of anyone paying attention, we’re doomed.
anytime we highlight the amount of debt this country is in is fine by me – I want to see who votes to raise it – esp those who consider themselves fiscally conservative
Doug, I agree that unthinking raises of the debt limit are maddening, but I disagree with Galbraith’s assessment that it was political cover. It’s unsupported, first of all, and he has the facts wrong — he says “we were about to enter the Great War.” When the Second Liberty Bond Act passed in September 1917, we’d already been at war for months.
I think it’s really a practical issue more than anything. Congress didn’t want to do the heavy and frequent lifting of figuring out terms and interest rates for each issuance, so it delegated that authority to the Treasury.
Didn’t McConnell just propose doing exactly that?
@Doug Mataconis:
Both parties? The Democrats have been successfully ignoring their base for quite some time, Doug.
@Rob in CT:
Is that why Pelosi recently declared that the House Dems wouldn’t accept any deal that included entitlement spending cuts?
Q. Where did the “debt ceiling” law come from? – Woodrow Wilson as a part of his ruse to manipulate us into WW I, a pointless European conflict resulting in French revenge against Germany for 19th century losses – then the stage set for Adolf Hitler’s WW II – http://bit.ly/qzCcub read how this law has been a pointless ruse to fabricate a feeling of debt “accountability” when there has been no such thing. Debt spending is another form of taxation. What the government spends it taxes one way or another. (spreading the word, just thought I’d share)
@Michael:
Pelosi, while important, isn’t the whole show. Obama, who has been on board for entitlement cuts for a long time, matters too. As do the Dems in the Senate. There is also the difference between words and deeds. This is, of course, applicable to the GOP – it’s possible that this is all posturing to get the best deal possible. I believed that was so for a while. Part of me still does, but I’m increasingly doubtful. They just rejected a 83% cuts/17% revenues deal. There is very, very little daylight between that and 100% cuts – which isn’t a deal at all.
Also, for a trip back to the recent past, there is the ACA. I know to conservatives it’s a socialist horrorshow. To the base of the Democratic Party, however, it’s a corporatist sellout. It’s not Medicare for all, and it even lacks the “public option.” Obama never considered the first and ditched the second as quickly as possible. Pelosi & Co. signed on in the end. There was squawking, but they did it, and there was some public shitting on the progressive base in the process.
There is poll data that explains this:
“68 percent of self-identified Democrats, as well as 76 percent of political independents, say they want Democratic leaders in the House and Senate to make compromises to gain consensus in the current spending debate.
By comparison, 56 percent of self-identified Republicans — and 68 percent of Tea Party supporters — want GOP leaders to stick to their position, even if it means the inability to achieve consensus.”
http://msnbcmedia.msn.com/i/MSNBC/Sections/NEWS/A_Politics/_Today_Stories_Teases/11139%20April%202011%20Filled-in.pdf
The GOP’s base has established that it will punish compromisers. The Democratic base has established that it won’t, really (they’ll complain, loudly, but that’s about it). The politicians act accordingly.
That chart looks suspiciously like one not using inflation adjusted dollars. Are you sure it’s comparing apples to apples.