The statutory debt limit, or debt ceiling, was designed to control congressional spending by limiting the amount of debt the federal government could accumulate. Clearly, it has not fulfilled its legislative purpose. In the last 10 years, Congress has increased the debt limit 10 times, raising the limit twice annually in 2008 and 2009. In her weekly appearance on Bloomberg TV, Reason columnist Veronique de Rugy explains the truth about the debt ceiling by separating economic fact from economic myth.
Myth 1: Failure to increase the debt ceiling is insanity. Unless we increase the debt ceiling, the U.S. government will default on its debt.
Fact 1: The federal government has other options. If the debt ceiling is not increased, the Treasury Department can make interest and debt payment its first priority to avoid a default. Then it can essentially put the government on a stringent pay-as-you-go basis.
Myth 2: These are extraordinary times. We have to increase the debt ceiling now and we will cut spending later.
Fact 2: In the last 10 years, Congress has raised the debt ceiling 10 times, sometimes twice in the same year. Congress has raised the debt ceiling 98 times since 1940. The government has lost its ability to monitor its spending. Having to raise the debt ceiling again is only a sign that Congress keeps failing to do what is necessary to get the nation's finances in order.
Myth 3: Democrats are the big spenders and are the party of debt. We know this because they want to increase the debt ceiling while Republicans oppose the increase.
Fact 3: Historically, the party in power always wants to increase spending. As a result, lawmakers in power–regardless of party affiliation–overwhelmingly vote to increase the debt limit.
For additional information, see de Rugy's article "The Truth About the Debt Limit." https://reason.com/archives/2011/02/03/the-truth-about-the-debt-ceili
Approximately 6.30 minutes.
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