News broke on Thursday that President Donald Trump and Senate Minority Leader Chuck Schumer (D-New York) had struck a “gentlemen’s agreement” to pursue legislation essentially eliminating the debt ceiling. The issue was discussed at the same Wednesday meeting where the president struck a deal with Schumer and House Minority Leader Nancy Pelosi (D-California) on Hurricane Harvey relief and a short-term increase of the debt ceiling that reportedly left Republicans shocked and angered.
“It could be discussed,” Trump told reporters. “For many years, people have been talking about getting rid of [the] debt ceiling altogether.”
Trump has a point—economists on both sides of the aisle agree there’s a case to be made for getting rid of the debt ceiling. Earlier this summer, Jason Furman, who served as the chairman of President Barack Obama’s Council of Economic Advisers, and Rohit Kumar, who served as domestic policy director to Mitch McConnell (R-Kentucky), published an op-ed in the Wall Street Journal arguing for repealing the debt limit.
“[W]e both believe that the statutory debt limit has outlived its usefulness as a mechanism for restraining the size of the national debt,” Furman and Kumar wrote. “Or, put more precisely, we think that whatever residual value the debt limit may have is far outweighed by the risk that a potential U.S. default poses to the global economic order.”
It’s important here to keep in mind what “raising the debt ceiling” means. When lawmakers vote to raise the debt ceiling, they’re not voting to spend more money. They’ve already taken that vote, and they’ve already agreed to spend the money. Here’s how Furman and Kumar put it:
The Constitution assigns Congress the power to tax and spend, which determines the annual budget deficit and, therefore, the debt. Separately, the Constitution authorizes Congress to “borrow Money on the credit of the United States.” But what if lawmakers approve spending, and then later refuse to borrow the money needed to satisfy the obligation? The result would be a default: Washington either would stop paying bondholders or would fall short on its other commitments—for example, to disabled veterans or defense contractors or even taxpayers who are owed refunds.
The thought of repealing the debt ceiling doesn’t sit well with conservatives, many of whom have, in recent years, used the threat of default as leverage to demand deep spending cuts. In a press conference yesterday, Speaker of the House Paul Ryan (R-Wisconsin) expressed his opposition to the idea. “I won’t get into a private conversation that we had,” Ryan said. “But I think there is a legitimate role for the power of the purse and Article 1 powers, and that’s something we need to defend here in Congress.”
Likewise, Rand Paul (R-Kentucky), who recently authored an op-ed suggesting that Congress keep tax reform “simple” and just slash corporate and individual tax rates without getting caught up in silly concerns over revenue neutrality, also expressed his opposition to eliminating the debt ceiling on Thursday. “I think the debt limit should be used to try to bring reform in Congress,” Paul told reporters. “I think the debt limit is a good vote to have. It gives us leverage to demand big spending cuts on a regular basis.”
It doesn’t, however, really seem like a good enough reason to keep the debt ceiling around. Pretty much everyone agrees that the consequences of actually failing to raise the limit would be disastrous, but the frequent posturing and threats around the issue have been pretty damaging too. There are plenty of good reasons to be concerned about the country’s debt, but there’s a time and place for those discussions—when authorizing government spending or, say, when considering whether or not tax reform legislation should be revenue-neutral.
