Can someone more versed in economic issues explain why we are having a faux-debate over the debt ceiling?
Here is my understanding of how the debt ceiling works: Congress votes to spend money that the government doesn’t have and then tells the Treasury department to borrow the money (in the form of government bonds) so that they can pay the bills. But refusing to raise the debt ceiling is simply telling the Treasury department that it is no longer authorized to borrow money—it doesn’t change the fact that the money has already been (or soon will be) spent. In would be like you spending $15,000 using your credit card and then calling Visa to tell them not to increase the limit above $10,000.
As former Reagan domestic policy adviser Bruce Bartlett, once said:
As far as I am aware, no other country on Earth has the idiotic policy that the United States has of having a legal limit on the amount of bonds the central government can issue. They correctly recognize that the deficit and the debt are simply residuals resulting from the government’s tax and spending policies. It makes no sense to treat the debt as if it is an independent variable.
Presumably those who oppose raising the debt ceiling are aware that it has no beneficial effect on spending. The debt ceiling has been raised over a hundred times and it will be raised again. So why do they do it? Is it simply a political dog-and-pony show to confuse the less economically savvy into thinking they are actually doing something? Or is there a substantive reason for the stance that I’m missing?