The United States currently functions without a debt ceiling. Legislation in November suspended it through March of 2017, and it should stay gone.
Others have agreed--most notably James Surowiecki in "Smash the Ceiling" in The New Yorker (August 1, 2011). The debt ceiling, like the old saying, is "like a monkey in a China shop; it cannot do any good, but could do a great deal of harm."
Superficially, it would seem to be a mechanism to control federal spending, and many people think of it in that way. They are wrong. It does not control spending. Congress already controls federal spending through its budgeting processes.
Since 1974, budget resolutions have determined specifically how the government may tax and spend. There is no need for an additional ceiling.
What the debt ceiling does do is pernicious. It lets Congress approve any amount of spending it pleases--amounts to be spent by the executive branch--but then places a limit on the amount that the Treasury can borrow to pay the bills that result from the spending that Congress has already approved.
People who find out about the system's true nature often are puzzled. "Isn't it irrational," they ask, "for Congress to approve spending, and then to create the possibility of refusing to agree to the borrowing required to pay for that spending"?
The reason it seems irrational is that it is. The United States is the only large, advanced, country that imposes such a restriction. The others have no difficulty functioning without one.
The debt ceiling does not hold down federal spending at all. The only effect it could have is to prevent the government from paying the bills already owed for expenditures that Congress already has authorized. If Congress were not to raise the ceiling when necessary, the government could not pay its bills, it would go into default, and at the extreme would shut down.
That is why the debt ceiling has routinely been raised to cover borrowing whenever necessary to pay the bills--this has happened some 78 times since 1960, in fact; 49 times under Republican presidents, and 29 under Democratic ones. Ronald Reagan was among the Republicans raising the limit. He did so many times, arguing, correctly, that it was vital to raise the ceiling. Failure to pay the country's debts, he said, would lead to default, which would be disastrous in ways impossible to predict. "The Nation can ill afford to allow such a result," President Reagan said.
Occasionally a member of Congress will vote against raising the debt ceiling as a protest of a policy. Senator Obama did just that. Whether wise or not, such a vote now and then causes no trouble. It is completely irresponsible, though, for a substantial number of members--especially for a political party itself--to threaten an actual rejection of a needed increase. If successful, such a vote would be catastrophic. Unfortunately, it has become commonplace for large numbers of Republicans to threaten to vote against needed debt ceiling increases.
The danger here is that some extremist members of Congress simply do not believe in government. They do not believe a shutdown would be serious. In some cases--if they actually mean what they say--they even think that bringing the government they hate to a halt would be a good thing.
It is only recently that the debt ceiling became a potential threat to the country. However non-functional it may have been, as long as Congress recognized that its duty was to protect the country and make America's programs work as well as possible, the debt ceiling presented no danger.
Recently, though, many congressional Republicans have come to believe that their foremost duty is to oppose the president, regardless. Such an attitude, combined with the existence of a debt ceiling, gives a lethal weapon to any faction willing (or eager) to cause a government shutdown.
Consider, for example, the opposition's reaction to the Affordable Care Act, "Obamacare." Previously, if one party opposed another party's enacted program strongly enough, the opposing party might try repeal. That is appropriate, but for the good of the country, the opposing party would cooperate to make that program work as well as possible so long as it existed. If repeal failed, they would accept the inevitable, and put the issue behind them.
With healthcare, however, failures of constant votes to repeal do not convince Republicans that they have lost. They continue attempts to undercut "Obamacare," misrepresenting it as a "job-killing failure" despite its obvious success; they literally try to make it fail. This reflects the extremism that makes the existence of a debt ceiling so dangerous.
How did such an irrational system come to be? At one time, a ceiling performed a useful function. Congress adopted one for the first time to deal with financing in World War One. Before then, as described by the Bureau of Public Debt, whenever the government needed to borrow, it had to seek congressional approval "for every debt issuance." In 1917, however, that became too cumbersome. Financial pressures from the war were so great that Congress approved a measure granting borrowing authority--the issuance of Liberty Bonds--to the Department of the Treasury so long as the amounts borrowed remained below a certain figure, a "debt ceiling."
In 1974 Congress adopted the Budget and Impoundment Control Act providing a budget procedure that permits the Treasury to borrow only what the budget specifies, and controls taxing and spending. Thus, Congress controls the budget without the necessity of a debt ceiling, yet the ceiling remains (although suspended for the time being).
Conservatives and some economists argue that it continues to provide some sort of fiscal restraint. This is fanciful, but even if correct any potential benefit is tiny, while the possibility of harm is huge and very real.
It is past time to eliminate the danger. Kill the debt ceiling. It's the smart thing to do.