Democrats in Congress Seek to Abolish US Debt Ceiling

WASHINGTON — As lawmakers struggle again with the nation’s debt ceiling, Democrats on a financial committee suggested Wednesday the economy would get a bigger bang for the buck without the limit on spending.

Republicans said eliminating the debt ceiling equates to uncontrolled government spending, inflation and a stumbling block for economic growth.

In January 2020, the Congressional Budget Office projected the gross national debt would reach $30 trillion by the end of 2025.

The debt is being paid off through a federal budget that last year reached $6.8 trillion.

“This is ridiculous that we have this kind of debt in our country,” Rep. Earl Carter, R-Ga., said during a hearing of the House Budget Committee. “This is unsustainable.”

The debt ceiling is a legislative limit on the amount of national debt that can be incurred by the U.S. Treasury. It limits how much money the federal government is authorized to spend to pay off its loans.

The controversy arises when the federal budget reaches the debt ceiling. It means the U.S. government might not be able to pay its bills, possibly creating a crisis leading to recession.

A crisis appears to have been narrowly averted Dec. 16, 2021, when President Joe Biden signed a debt ceiling increase of $2.5 trillion. The Treasury Department had warned him the government was in danger of defaulting for the first time in history without the authority to borrow more money.

Since 1960, Congress and the presidents have raised the debt ceiling 78 times, according to the Treasury Department.

Biden’s signature on the debt ceiling increase allows the government to pay its bills into 2023.

It also gives political leverage to Republicans who say Democrats are again directing the economy into ruin with excessive spending. Political analysts say Republicans could mention the debt ceiling increases to win votes in the upcoming midterm elections.

Democrats say the Republicans’ complaints are overblown. They describe the debt ceiling as a constraint on the government’s ability to manage the economy into greater growth.

“As the debt limit remains in place, there’s a direct threat to our entire economy,” said Rep. John Yarmuth, D-Ky., chairman of the House Budget Committee.

He said the recovery from the recession induced by the COVID-19 pandemic served as an example.

Despite the record national debt, “Our recovery is beating projections and setting records,” Yarmuth said. It has included “the most jobs created in a single year ever,” he said.

He and other Democrats acknowledged that inflation — which is running at about 7.5% — is a problem. However, economic growth is far outpacing inflation, they said.

Without the spending constraints of the debt limit, lawmakers might be able to engineer even greater economic gains, according to Democrats on the committee.

They have found support from some economists. A 2013 University of Chicago survey of 38 academic economists showed 84% agreed “a separate debt ceiling that has to be increased periodically creates unneeded uncertainty and can potentially lead to worse fiscal outcomes.”

Louise Sheiner, a Brookings Institution economist, told the House Budget Committee, “The debt ceiling does not serve any useful purpose.” She described it as “a political roadblock.”

Laura Blessing, a senior fellow at Georgetown University’s Government Affairs Institute, said, “There’s little evidence the debt ceiling creates fiscal restraint.”

The hearing renewed themes from the 2011 debt ceiling crisis and the Budget Control Act, which Congress approved after the credit rating service Standard & Poor’s downgraded the U.S. government’s credit rating for the first time in its history.

Standard & Poor’s was responding to the government’s inability to bring its deficit under control.

The Budget Control Act set up a system of sequestration. It is a provision that causes an automatic reduction in certain parts of the federal budget if they surpass debt ceiling limits.

If Congress enacts an annual budget that exceeds the caps, an across-the-board spending cut kicks in for all departments and programs listed for the limits.

Mick Mulvaney, director of the U.S. Office of Management and Budget during the Trump administration, said the debt ceiling compels Congress to exercise restraint on its budget. He blamed the move to abolish the debt ceiling on lawmakers seeking a blank check for their spending.

“The rules are not broken, Congress is broken,” Mulvaney said.

By retaining the debt ceiling, “You get better fiscal outcomes,” he said.

Tom can be reached at [email protected]