Policymakers who want to improve the country's economic and budget outlook should scrap the debt limit (also known as the debt ceiling), which plays no role in enforcing budget discipline. Rather, in today's dysfunctional political environment, it encourages reckless brinksmanship that makes it harder to work out the compromises necessary to achieve a sustainable deficit-reduction deal.
I explain that the debt subject to limit and its close cousin ”gross debt” (which is featured in those scary debt clocks) are deeply flawed measures of no economic or financial significance to serious budget analysts. But my real beef is that having a debt ceiling opens us up to irresponsible political mischief and dangerous policies.
Anyone who thought last year that a debt ceiling fight could catalyze a responsible budget compromise should heed the proverb, “Fool me once, shame on you; fool me twice, shame on me.”