Should the U.S. Abolish the Debt Ceiling?

The debt ceiling is the legal amount of money the United States Department of the Treasury may borrow in order to pay the bills already appropriated by congress, and signed into law by the president. It has existed since World War I, the Kingdom of Denmark is the only other country to impose a debt ceiling.

Citing a study conducted by the University of Chicago, in January found that 84% of U.S. economist think that a separate debt ceiling that has to be increased periodically creates unneeded uncertainty and can potentially lead to worse financial outcomes. Danish economist Jacob Kirkegaard says there’s no “economic justification for it whatsoever” only a political justification.

Origins of the Debt Ceiling. 

The debt ceiling dates back to legislation from the First World War in 1917, it was designed to make it easier for Washington to raise money for war efforts. Limiting the amount of debt the president may authorize the treasury to issue was to be a check and balance between the Congress, and the President.

After the war congress set the national debt at twice the actual amount of debt giving the government some room to maneuver, unlike Denmark where politicians keep the debt from becoming a political football capable of holding the nation hostage the United States, has yet to accomplish.

United States creates laws but without revenue to fund them. 

The U.S. debt limit was set at $16.669 trillion, having officially reached this amount the U.S. government has been funded by a series of extraordinary measures enacted by the Secretary of the Treasury.

Senate Minority Leader Mitch McConnell said “If  we’re going to address the debt ceiling, than let’s also address the root causes of our debt.” McConnell estimates Washington is borrowing nearly $2 billion per day to cover spending Congress has already approved.

The debt ceiling didn’t become much of an issue until 1995, when the Gephardt rule was repealed, the rule raised the debt ceiling whenever a budget was passed based on the amount of spending that was authorized the rule was in effect from 1979 to 1995.

In 1995 then Speaker of the U.S. House of Representatives Newt Gingrich, saw that he could replace the Gephardt rule with negotiations on the debt ceiling and use it as a whip to get people to make deals with him.

Abolishing the Debt Ceiling. 

The vast majority of economist including republican economist, favour abolishing the debt ceiling because of how much it sets back economic growth. According to recent reports this years political strife has already costed the U.S. one per cent in GDP.

A bipartisan proposal was created in 2011 called the Biennial Budgeting and Appropriations Act, sponsored by two senators, Republican Johnny Isakson and Democrat Jeanne Shaheen. The law would do away with the debt ceiling and switch the federal government process to that of a two year cycle with one year devoted to appropriation and a year the second year devoted to oversight of that spending. This would free up more time to actually govern and avoid these regular debt crises.

Issues the U.S. Government needs to Address by the end of 2013.

Due to the recent government shutdown that lasted some 16 days, furloughed some 800,000 american’s, and removed $24 billion from the United States economy several issues need to be addressed immediately.  An Immigration bill that would add $1.4 trillion to the U.S. economy in the next two decades the passage of a Five-year Farm Bill should be passed so that essential services such as the Supplemental Nutrition Assistance Program don’t become political footballs in the coming months. Last a budget must be passed that continues to create jobs, and reduce our deficits at a reasonable pace must be passed. I believe these bills would help restore some amount of confidence in the United States, and help stable if not improve  world markets.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s