Debt Ceiling Worries Are Overblown: Opinion
NEW YORK (TheStreet) -- The debt ceiling debate seems to have returned from the dead. But as our boss Ken Fisher has said, what many folks miss is that the debt ceiling is a purely political (and arbitrary) machination. And it's one that members of Congress aren't terribly motivated to fix, so it's unlikely to kick the bucket anytime soon.
For context, Congress used to have to approve debt issuance, but during World War I, lawmakers feared such a mundane task might slow potential war funding. Hence, they created the debt ceiling in 1917 to (try to) take themselves out of the picture.
Noble enough! But the limit was arbitrary and didn't account for debt's tendency to grow in sympathy with the broader economy. Hence, over time and as the country grew, our debt rose as well, butting up against Congress's arbitrary ceiling.
Congress mostly rubber-stamped debt ceiling increases until the mid-1950s, when lawmakers began using the debt ceiling as a political tool to leverage concessions from a president and/or the opposing party by threatening a government shutdown and a potential debt default.This political gamesmanship has occurred over and over. Often the deliberations go down to the wire (or even a bit beyond) before a new ceiling is established. In fact, the debt ceiling has been lifted 91 times in the last 40 years. No politician wants to be tainted with causing the U.S. to default. Yet, at the same time, neither party wants to give up this potential battering ram. Hence, we likely will continue to have debt ceilings, debt ceiling debates and half-hearted "solutions" for "solving" the debt ceiling dilemma. One such solution we've heard in recent years is minting a $1 trillion platinum coin, as explained in a post at AEIdeas, the public policy blog of the American Enterprise Institute. At CNN, Jack M. Balkin wrote, "some commentators have suggested that the Treasury create two $1 trillion coins, deposit them in its account in the Federal Reserve and write checks on the proceeds." That is ... one ... (theoretical) option. Yet we'd hasten to add it's entirely unnecessary and likely comes with unintended costs of its own. There is, after all, no such thing as a free lunch.
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