The debt ceiling is idiotic. What would be better?

Great Debates
1

A debt ceiling that’s a fixed number, which has to periodically be raised by Congress, is idiotic. It encourages brinkmanship. (That may have been the intent, but I stand by my claim that it’s idiotic.)

If we accept the idea that we should restrain the government’s ability to pile up debt without limit, what would be a more effective way?

My (admittedly naive) approach would be for the limit to be something like a percentage of average GDB for the previous 5 years. That would limit the size of the goverment (by limiting its debt) to a fixed portion of the national economy. Conservatives are more likely to favor this than liberals who may think that the federal government should be a larger portion, but those two sides could adjust the percentage as they see fit, when they’re in power, etc (hopefully, with a supermajority of some kind, to avoid jerking things around too much).

Another option might be for the limit to be a ratio to revenues. This would permit unlimited government growth as a proportion of the national economy, but only to the extent that it’s funded by taxation.

In either case, I suggest that if Congress doesn’t pass a budget that meets the limit, an automatic budget goes into effect that’s last years budget minus 1 percent across the board (for nonmandatory spending as opposed to statutory). Similar to the sequester, and ideally, something that would be generally very unpalatable to both sides of the aisle if it continues for long. This would tend to force compromises, without the idiocy of the fiscal cliff. It would also tend to rein in runaway spending.

I bet you can come up with better or more well-informed suggestions, or point out flaws in these, or benefits I hadn’t considered.

For the record, I’m a fiscal conservative social liberal, and I’m not happy with the Republican party’s concept of what it means to be fiscally conservative. By the term, I mostly mean: “Don’t spend what you can’t afford.” But I also believe it’s foolish not to spend what you can’t afford not to spend, and that the federal government should spend more on investing in our future and less on trying to douse problems with money.

2

Something better (and simple!): If Congress mandates spending in excess of revenue, that automatically authorizes debt equal to the difference.

There’s no point to legislation that limits Congressional spending - it’s just a law, and Congress is allowed to change the laws. If they really want to spend money, they can.

3

Congress+President already controls spending and revenue. I don’t see the point of having any type of additional mechanism to limit spending & borrowing if it’s controlled by the same people.

4

I favor an amendment: If budgeted expenditures exceed revenue, the president shall be authorized to borrow the difference. If Congress doesn’t want to increase the debt, then Congress can pass a balanced budget.

5

I can give 17 trillion reasons for spending limits.

There seems to be some odd belief that the United States can increase it’s debt indefinitely. Not sure why people think this way. We’re seeing cities like Detroit in default. This was one of the most productive pieces of real estate in the United States and now the city looks like an impoverished 3rd world country.

Look at the financial situation in California. We’re living in a house of cards and nobody seems the least bit concerned.

6

Maybe a law or constitutional amendment that says congress can’t approve expenditures that require money that doesn’t currently exist? (not physical money, but i mean actual spending power)

… ? If we’re not carelessly printing money, would we not needlessly increase the debt?

7

Go back to the pre-WW1 days when Congress had to approve each and every debt instead of letting the president spend at his behest.

In an ideal world, also:

A) Require a balanced budget every year with a separate increase for each debt the Congress intends to take on. Toss the entire House or Senate out on it’s butt if it doesn’t pass a balanced budget by fiscal year end and elect new people.

B) Require each passed bill to include source of funding and maximum per-year expenditure. (All expenditures automagically raised each year per inflation)

8

Oh hell no. We recently had a school superintendent put forth a levy for new schools and he spent twice that and damn if he didn’t get a second levy to cover it. He then left the district for a better job. Screw that. I’d make public officials financially liable for their decisions up to and including forfeiture of all their assets.

9

I agree, we need spending limits. But we don’t need borrowing limits.

10

“Printing money” has nothing to do with the debt. It’s a simple spending vs. revenue issue.

11

If congress passes legislation that requires funding, it should be implied that the funding is authorized too. I don’t know why these are two separate issues, with two separate, and often contradictory, votes. Don’t pass the legislation if you don’t want to pay for it!

It’s like having a discussion with my wife over whether we should buy a car. After much negotiation over make, model, year, and features, we’ve finally come to a decision: Yes, we will buy the car! “Okay, honey, now let me ask you this: Do you think we should pay for it?” :smack:

12

There’s nothing wrong with the debt ceiling, just the Republicans who think its a piece in a game of chess. Anything better would be to utterly and completely remove Republicans from having a say in it

13

This is a terrible idea because it ensures cyclical economic policy, and in a liquidity trap (like what we’re in now), it leads to an economic death spiral. We saw this in Germany in the late 1920s and pre-hitler 1930s. What the percentage is doesn’t matter.

Again, same problem - it’s utterly cyclical. Binding government spending to the economy is a terrible idea.

This is also a bad idea, because various branches of government are hurt more by cuts than others.

I honestly don’t see the point. I just don’t. Either congress will pass balanced budgets or it won’t. To place some sort of legal cap there is pointless, because if need be, congress can just remove it. What’s more, the debt we have isn’t really that bad, and it’d be a hell of a lot better if we stopped focusing on it in the middle of a major demand-based, zero-lower-bound depression!

Funny story - as long as GDP increases similarly to debt, we’re doing just fine. The meaningful number is not 17 Trillion. It’s 73.6%. America isn’t even in the top 30 countries in terms of debt by GDP, and at this point it’s kind of hard to say at what point it’d be a problem, especially when T-bills remain the number one hard asset and the USA prints its own currency, making inflation a possibility. The US debt is not the problem people make it out to be. You want me to look at 17 trillion and gasp in horror. I look at it and think, “Man, Japan is waaaay worse in debt than we are, and they don’t have any large problems because of it”. We can still borrow, given how much people like T-bills (even when the net interest rate is close to or even below inflation), and it doesn’t look like that’s likely to change in the short or long term.

If you don’t understand why Detroit (a rust belt city hit extremely hard by globalization and the 2008 financial crash with a gigantic sprawling urban poor and extremely lousy infrastructure and unemployment) is not analogous to the USA or any state within the USA, you shouldn’t be talking about economics.

Also, the debt ceiling is not a spending limit.

14

The problem is that the debt limit lets politicians protest “spending” and “going into too much debt” which is a very general and politically safe position. When people hear “we should reduce spending” they tend to think “we should stop wasting money on stuff that is obviously stupid, like stuff I don’t use”. But you haven’t gotten yourself into trouble by coming out against anyone’s particular issue.

Without a debt ceiling they’d have to protest “we’re spending too much money on XXXX” where XXXX is something that some people support and you can loose votes over cutting. If it’s corn subsidies, you make enemies of the farmers. If it’s education you make enemies of the teachers. So much more dangerous that being opposed to “spending” and “debt”.

What I’d like to have is taxes determined in two parts: First a curve that indicates how the brackets are arranged (i.e. second bracket starts at $XXXX and is Y% higher than the first bracket) and a multiplier that multiplies the whole curve so that tax revenues cover last year’s deficit. People will be much less likely to vote for spending if they know their taxes will go up directly because of it.

15

If Congress wanted to, they could pass a law putting the debt ceiling at 300% of the national income, recalculated annually, and we would never have to think about it ever again.

They’re not going to do that. Too many of them like the present situation.

16

I don’t think the debt ceiling is idiotic at all.

The government has already shut down over an appropriations bill. For it to continue to be shut down over the debt ceiling is kind of a non-issue at this point. While the term “debt ceiling” may color the rhetoric, I think the vast majority of Americans get that this is fundamentally a debate about 1) Obamacare in particular and 2) overall direction of the government in general. And Americans get that it’s a tactic being used by an idealistic minority of the representatives because they lack the votes to pull off a more direct approach.

The fact that the debt ceiling is being used as a political pawn in this argument is not really relevant to the overall utility of the debt ceiling concept. Complaining about the debt ceiling is a little like complaining that hammers are stupid because someone once used one to kill her husband. If you replace hammers with nail guns, someone will use one of those to kill her husband.

17

This is a fundamental misunderstanding. The debt ceiling does not “shut down” the government. It effectively declares it for insolvent. It means we can no longer borrow money, and when the deficits are this large, we’re essentially dealing with, in the very best case scenario, a default of our obligations in Medicare and Social Security. Worst case scenario, a default of our national debt, which would mean that T-bills, essentially the last bastion of reliable financial security, and one of the fundamental things on which the entire world’s current economy bases, may not ever pay out. The results will be, in any case, catastrophic. This is not simply “the government shuts down”.

Well, no. The fact that the debt ceiling is being used as a political pawn is utterly relevant, because it means that the USA basically has a way for a majority of one house of congress, or a president, to say, “Nope, fuck you, world economy, we are bankrupt now”. It’s less like a hammer and more like a nuclear warhead in terms of impact.

18

Hammers have a known utility for driving nails. What is the known utility of a debt limit? It is disconnected from appropriations, so reaching it doesn’t reduce spending. So what justifies it except as a wedge to be used by those who lack the political power to reach their goals through legislation, and are willing to risk the global economy to achieve them?

19

From the Westminster system, adopt the idea that failing to pass a budget is a vote of no-confidence that dissolves [del]Parliament[/del]Congress, leading to immediate elections. Put the incentive on actually finding a budget that passes. One of the many drawbacks to the piecemeal spending/authorizing done now is it obscures the big picture, holds hostage spending issues that lean one way or the other ideologically (thus triggering a partisan battle), offers the possibility of deferring one issue to handle another until it’s too late, and becomes a perpetual series of crises–as you’re seeing now.

20

My proposed Constitutional amendment from another thread:

The hats are important.

I know that doesn’t exactly address the debt ceiling, but it does address the budget issue.

As for the debt ceiling, I agree that it ought to be tied to proposed legislation: if we as a nation agree to embark on a particular project, we’re agreeing to pay for that project, and we shouldn’t later debate about the payment.