Should the U.S. Debt Ceiling Be Eliminated?

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 Foreign Countries and Debt Ceilings

Only the United States and Denmark have legislated debt ceilings that require governmental action to increase. Furthermore, Denmark’s is sufficiently above its current level of national debt as to not threaten bumping up against the limit. Other countries either have no such legislated brakes whatsoever, or much less rigid processes to authorize additional borrowing authority. Unlike the U.S., where annual budgets and funding mechanisms within the borrowing authority are not directly linked, countries such as Canada and Sweden tie them together as a mandated part of the approval process.

Thus, by all accounts and purposes, the risk of potentially breaching an arbitrary debt ceiling is singularly that of the United States.

Debt Ceiling Politics

Once a mundane technicality, the debt limit has become a front-and-center issue in America today due to public awareness over the dire straights of the country’s finances. Both political parties have vowed to block future increases unless their versions of solutions to U.S. fiscal problems are adopted. Without legislative action to raise the limit, the government would be in the untenable position of a partial shutdown, as it could not borrow additional money to keep many departments running. The credit markets would freeze, as the once-mighty phrase “full faith and credit of the United States government” would be rendered meaningless. Consumer confidence would be shattered and the stock market would plunge. These actions would, in all probability, sink the economy back into recession.

There are calls to remove the debt ceiling, most notably by Treasury Secretary Geithner. In an interview with Political Capital host Al Hunt, Geithner argued that “we ought to just eliminate the debt ceiling,” stating that “We’ve had 100 years of experience with it, and I think only once-last summer-did people decide to use it to threaten default on the American credit for the first time in history as a tool for political advantage. And that’s not a tenable strategy.”

A clip of Geithner’s comments can be seen below:

Remove the Debt Ceiling? The Debate

Naturally, the comments sparked debate within the media; traditional as well as social. The fact remains, however, that with 106 increases over a 71-year span, there has been a debt ceiling, but in name only. The good news is that it is no longer being taken for granted. The bad news? The same intransigent positions that helped create the problem remain at loggerheads when it comes to debating how to solve it.

Resources

Politifact. Obama says Reagan raised debt ceiling 18 times; George W. Bush seven times (2012). Accessed on November 25, 2012.

Brandimarte, Walter. Moody’s suggests U.S. eliminate debt ceiling(2012). Reuters. Accessed on November 25, 2012.

The Committee for a Responsible Federal Budget. Debt Ceiling Primer. (2012). Accessed on November 25, 2012.

Newman, Rick. Another U.S. Credit Downgrade is Coming — And it Won’t Matter. (2012). U.S. News & World Report. Accessed on November 25, 2012.

A History of Surpluses and Deficits in the United States. (2012). Dave Thomas. Accessed on November 25, 2012.

Marotta, David John. Sovereign Debt and Deficit by Country(2012). Forbes. Accessed on November 25, 2012.

Simeral, Christen. Debt Ceiling 101(2012). The American Prospect. Accessed on November 25, 2012.

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