The debt ceiling is an artifact of the First World War. In the 19th century, Congress authorized each and every bond issue by the United States. The costs of global war rendered that practice untenable, so instead Congress granted the executive branch a generalized authority to borrow up to a set amount. It seemed a good idea at the time. In the modern context, however, the debt ceiling creates very negative incentives for Congress. Congress can first vote to create a deficit, then vote to refuse to cover that deficit. Remember, its Congress that sets the level of tax. Its Congress that sets the level of spending. If Congress is unhappy about the difference between those two levels, Congress has the power to close it. Theres no need to threaten to blow up the financial world.CNN
Posted on: Tue, 22 Oct 2013 02:01:39 +0000
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