Congress will likely waste considerable time posturing over the debt limit before taking the necessary step of raising it. That’s why EconoSpeak’s Barkley Rosser recommends abolishing the debt limit altogether. Rosser says he may be the first to publicly call for such action, but anyone reading between the lines would find a longstanding kindred sentiment at the Congressional Budget Office.
My colleague Kathy Ruffing was one of the authors of a 1993 CBO study that said (p. 43):
Voting separately on the debt is ineffective as a means of controlling deficits, because the decisions that necessitate borrowing are made elsewhere. By the time the debt ceiling comes up for a vote, it is too late to balk at paying the government’s bills without incurring drastic consequences.
CBO said virtually the same thing last year (see p. 23). Ditto for Glenn Hubbard, dean of the Columbia Business School and former chief economist to President George W. Bush.
Whatever value the debt ceiling may have had in the past in concentrating policymakers’ attention on the need to address unsustainable deficits, the deficit issue is already front and center this time. Numerous commission proposals, the House-passed budget plan from Budget Committee Chairman Paul Ryan, and the President’s latest proposal have laid out the parameters of the fiscal responsibility debate. Brinksmanship on the debt limit has potentially serious economic consequences. It’s time for policymakers to get down to the business of making a deal on long-run deficit reduction — and here are our principles for (and cautions about) how to do that.