Most people have fond memories of their first boyfriend or girlfriend. But while some find lasting love with their first fling, it’s safe to say many more move on to find a more suitable lifelong companion. We might always remember our first love, but discovering “what’s out there” often shows the limits of what we had.
Of course, this phenomenon doesn’t apply just to dating.
So in honor of Valentine’s Day and in light of recent news, let me propose that it’s time to break up with the first love of American fiscal policy: the debt limit.
On Tuesday, the House voted once again to increase the debt limit, and the Senate followed suit a day later. The raise was “clean,” that is, without policy strings like spending reform attached.
Contrary to today’s common claims, the history of using the debt ceiling as leverage in policy negotiations is well-known. Using the threat of not raising the debt limit to get spending reforms has been one of few Congressional checks on federal largesse. But such cuts have generally been negligible in the face of massive spending and ever-rising debt.
The terms “debt limit” or “debt ceiling” themselves are misnomers, because they assume the current system restrains debt. It doesn’t. Since 1917, the debt limit has been raised over 100 times. Every administration since Harry Truman has added to the national debt. Raising the debt limit was not even controversial until it had existed for over 50 years.
That’s because the debt limit was never meant to constrain spending; it was created to make it easier to add more debt. When Congress tired of having to approve each new issue of war bonds during World War I, it created the debt ceiling to give the Treasury authority to issue debt up to a pre-approved limit. In other words, the debt ceiling was a tool to make it easier, not harder, to borrow money.
The debt ceiling isn’t even focused on future spending; it’s a limit on borrowing to pay for past spending obligations. Refusing to raise it, while not necessarily equaling default, would mean reneging on some financial promises and could harm the economy by rattling markets, generating uncertainty, or risking the country’s credit rating. Politicians, even those who identify as fiscally conservative, can be hesitant to engage in a potentially risky standoff.
Congress and the debt limit are clearly in a dysfunctional relationship. But getting rid of the ceiling wouldn’t leave us single and alone. In fact, there might even be better options out there.
Worldwide, various governments have adopted effective debt rules. Germany, Switzerland, New Zealand, Australia, Brazil, Chile, Canada, and even supposedly socialist Sweden have some form of fiscal rule that has worked better than our debt limit at constraining their country’s debt.