Statistic of the Day: Debt Ceiling Politics Redux
Eighty-four percent of economists surveyed by the IGM Forum agree with the following statement:
Because all federal spending and taxes must be approved by both houses of Congress and the executive branch, a separate debt ceiling that has to be increased periodically creates unneeded uncertainty and can potentially lead to worse fiscal outcomes.
That notwithstanding, political expediency again trumps sane economic policy, as James Hamilton explains:
The real purpose of the debt ceiling is political– it gives the minority party an opportunity to grandstand as if they’re somehow holding the line on the deficits that are the necessary mathematical result of previous spending and tax legislation.
Nobody has a plan on the table to cut spending by 26%, so nobody has any legitimacy pretending they’re against an increase in borrowing. Congress needs to propose specific plans for spending and taxes and simultaneously authorize the borrowing that would be necessary to implement that legislation.
By the way, anyone interested in the history of public debt limits should take a look at this 1954 paper by Cooke and Katzen.