Commentary Magazine

End the Debt Ceiling

Wikipedia Commons.

Along with getting Congress to increase the debt ceiling so that the government can pay its bills, at least until December, President Trump also suggested getting rid of the debt ceiling altogether.
It’s an idea that merits very serious consideration.
There are two clauses of the Constitution at work here. The first, Article I, Section 9, says, “No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law.” In other words, the Treasury can only spend money that Congress has told it to spend. And the Treasury has no option but to spend it. Presidents used to “impound” funds they didn’t want to spend, but that implied power ended with the Budget Control Act of 1974. (It should be called the Budget Out-of-Control Act, as it caused federal spending to spiral sharply upwards, but that is a story for a different post.)
The second clause, Article I, Section 8, says, “The Congress shall have the Power . . . To borrow Money on the credit of the United States.” In other words, Congress, not the Treasury, must decide to borrow money, authorizing the Treasury to do so.
Until 1917, Congress passed legislation to authorize each individual bond offering. But when we entered World War I, it was obvious that borrowing needs would be huge (the debt went from $1.225 billion in 1916 to $25.4 billion in 1919). And so Congress established the debt ceiling in place of authorizing each bond issue.
So what does the debt ceiling accomplish? Not much. If Congress appropriates money in excess of expected revenues, then the Treasury has no choice but to borrow the difference. The alternative is default, which would have catastrophic consequences. If Congress doesn’t want to raise the debt ceiling, its only option is to cut spending. Good luck with that.
For many years, Congress, knowing it had no choice, routinely raised the debt ceiling as needed, with little public notice beyond an occasional tut-tut editorial in conservative newspapers. For a good many years, a debt ceiling increase was attached to every annual budget resolution.
But as the middle emptied out in American politics in recent decades, Congressional authorization of a higher debt ceiling has become a political football, with each side trying to embarrass the other into making concessions. The government (or at least the unessential parts of it) has been shut down several times as the politicians played the sort of cynical politics that enrages most ordinary citizens.
Most countries have no debt ceiling. (Denmark has one, but it’s so much higher than the actual Danish national debt as to be effectively a nullity.) Of course, most countries’ budgets are largely determined by the executive. But in the United States, while the president submits a budget every year, Congress pays little attention to it, often proclaiming it “dead on arrival.”
What would eliminating the debt ceiling do? It would save members of Congress from having to make a vote that displays Congressional fiscal irresponsibility. It would prevent the sort virtue signaling and political brinkmanship that serve no purpose other than the most cynical ones. It might even help force the government into a desperately needed fundamental reform of the budget process, a process that has been slowly, but inexorably, leading the country into a fiscal disaster for more than four decades.