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There’s a Reason We Have a Debt Ceiling

With all of Washington butting heads over the question of how to let the debt ceiling rise, the investor service Moody’s thinks it has a better idea: eliminate the debt ceiling altogether. According to Reuters, a new report for the investor’s service whose ratings are critical to the value of bonds says it believes the problem isn’t so much the debate over spending cuts versus taxes as it is the system whereby the Congress sets a limit on the national debt. This self-imposed restriction creates “periodic uncertainty,” according to Moody’s analyst Steven Hess.

Moody’s has threatened to devalue the United States’ AAA bond ratings if payments are missed as a result of the standoff between the White House and Republicans. But though the suggestion that the debt ceiling be eliminated would resolve this problem, the idea would only serve to allow the size of government to continue to grow unchecked. While the process has proven to be messy, giving Congress the ability to stop the growth of debt may prove to be the only way to halt the slide into insolvency. Though many decry the demands of House Republicans for an end to the spending orgy, without this check on the system, the government will be able to write itself a blank check.

The service claims that there are other institutional practices to limit the size of the debt that could take the place of a congressional vote. But even Hess concedes such strictures have not stopped governments from expanding the debt if they were so inclined. It is also true that up until now forcing a vote on the debt ceiling has not impeded the growth of the government’s arrears, because the Congress has always dutifully voted an increase to avoid trouble. The threat of default may be more theoretical than anything else, but even the hint such a thing may be possible has brought the Democrats to the negotiating table and forced them to concede spending cuts heretofore unimaginable. Though the White House’s demands for tax increases have made an agreement elusive, this process has still made it possible to achieve cuts in government spending that would never have happened without the threat of a congressional veto on further debt.

As Senator Marco Rubio said yesterday on CBS’s “Face the Nation”: “The debt limit is not really the problem here, the problem is the debt.” So long as Congress has something to say about that limit and can use the power of a deadline to create an opening for real change, the nation will be forced to deal with the debt.