14 October 2013
The irony of the debt ceiling
Rick Newman, a writer for Yahoo's financial blog, offers some historical perspective on the debt-ceiling crisis. Back in 1917, when Congress created the concept of a debt ceiling, their idea was to make it easier for the government to borrow money. Establishing a debt ceiling was like passing a general incorporation law. In this case, rather than hold a vote to approve each bond issue through which the government borrowed money, Congress authorized borrowing as often as necessary up to a certain point. This was a wartime measure: it allowed the government to sell Liberty Bonds to raise money for our intervention in World War I. The ceiling has been raised piecemeal ever since -- though post-World War II legislation actually lowered the debt ceiling. Congressional Democrats in the 1970s rendered the debt-ceiling concept virtually obsolete by enacting the so-called Gephardt Rule that raised the debt ceiling automatically each time Congress approved a budget. The "Contract With America" Congress of 1995 repealed this rule as part of the austerity campaign that resulted in the 1995-6 shutdown. Republicans might well argue that if the debt ceiling idea has become an impediment to government, Democrats and "big government" types in general have only themselves to blame for generations of profligacy on credit. The ceiling was raised in the first place, however, not just for convenience but out of perceived necessity: the government could not wage a war it had just declared without funds. True fiscal conservatives might question whether a country should wage a war it can't afford, but through history other imperatives have overridden frugality. If there's a congressman willing to say we as a nation should do nothing we can't afford, I'll give him credit even though he's actually not asking for any. But if no one's willing to say that nothing justifies borrowing or "living beyond our means," then we can ask why some are willing to borrow for some purposes and not others. Maybe Ron Paul (if not Rand) might say we should neither kill on credit or keep people alive, but I have my doubts about everyone else. From another angle, the necessity of borrowing may simply reflect the fact that the nation doesn't really control its own resources, since they aren't simply at the government's disposal. Is it possible to ask, without jumping to ideological conclusions,whether this is really for the best?