James Wimberley argued last week that we’ve having the wrong debate: “Why are the negotiations about raising the debt ceiling rather than abolishing it?”
It’s a reasonable question. Under the current circumstances, raising the limit is mandatory, making a debate over the mechanism itself largely impossible, but once this current crisis is resolved — if it’s resolved — policymakers would be wise to scrap this foolish and unnecessary law.
Indeed, I’m glad some in the financial industry are beginning to recognize the dangers of leaving a loaded gun lying around.
“We would reduce our assessment of event risk if the government changed its framework for managing government debt to lessen or eliminate that uncertainty,” Moody’s analyst Steven Hess wrote in the report, first reported by Reuters.
The congressional role in setting a limit on debt, creates “periodic uncertainty” over the government’s ability to meet its obligations, Moody’s said.
The law was created in 1939 by congressional Republicans. The need to revisit and eliminate the law never really came up — responsible policymakers in both parties always realized the ceiling needed to be raised, so that’s what they did 89 times in the last 72 years. Even during the Bush era, Republicans raised the debt ceiling, without strings or preconditions, seven times. No muss, no fuss.
But that was before the radicalization of the Republican Party was complete, and now the very existence of this law represents a serious danger to the nation’s stability and fiscal health. Going forward, there’s literally no reason to leave this threat intact.
The entire mechanism is arbitrary and useless anyway — policymakers set an arbitrary limit for themselves, raise it so America can pay its bills, and then set a new arbitrary limit for themselves. Add to this an extremist majority party willing to use the ceiling to wreak havoc, and we’re left with an unnecessary law that has clearly outlived its usefulness.
What’s more, it’s worth noting that there’s nothing partisan or ideological about scrapping the law. In fact, my message to skeptical Republicans would be pretty straightforward: there may come a point in the near future when a Republican president has to govern alongside a Democratic Congress (a divide last seen just three years ago). Do you want those Dem lawmakers to have leverage over the GOP White House, threatening to crash the economy unless the Republican president meets a series of demands?
Dems have never done this before, but now that Republicans have changed the rules and created a hostage-taking blueprint, what’s to stop Democrats from pulling the same stunt? Is the GOP willing to take that chance?
Practically no other industrialized democracy has a debt-ceiling law, and for good reason — it’s dumb. Congress could pass a measure in this Congress, saying that the measure will expire in 2013, which would let policymakers vote with no knowledge of which party will be in control of which branch.