The pros and cons of raising the debt ceiling
A crisis is mounting as the GOP-led House of Representatives and President Biden remain at an impasse over the debt ceiling. This occurs every few years when the government finds itself needing to borrow more money to pay its financial commitments. Congress eventually reaches a deal to increase the amount of debt that can be incurred by the feds.
This is necessary because the nation borrows so much money, and "Congress has authorized trillions of dollars in spending over the last decade, causing the United States' debt to nearly triple since 2009," the Council on Foreign Relations notes. But is a cap on borrowing the best way to deal with the nation's debts?
Proponents of raising the ceiling view it as a necessary legislative tool to avoid a national default, while critics say that the ceiling "measures no coherent economic indicator." So is this continuous loop of debt ceiling increases necessary?
Pro: It's the only way to avoid defaulting
The obvious reason to keep raising the debt ceiling is that it avoids defaulting on the nation's debts. This means that the U.S. would fundamentally be unable to pay back its existing loans, described by Bloomberg as a "major disaster" that could significantly impact the world economy.
Raising the debt ceiling helps avoid a never-ending freefall toward defaulting. If this occurs, it means the U.S. "would not have enough money to pay its bills, including interest and other payments it owes to bondholders, military salaries, and benefits to retirees," Alan Rappeport writes for The New York Times. "No one knows exactly what would happen if the United States gets to this point but the government could wind up defaulting on its debt if it is unable to make required payments to its bondholders," Rappeport adds, arguing a debt ceiling is the best way to avoid this.
Con: There is no better alternative
While the debt ceiling causes problems, there is no other solution, its proponents argue. One alternative that has been floated is the idea of minting a $1 trillion coin to pay off the nation's debts. However, "there are so many murky questions about whether or not it's legal and [if] would it be challenged, and that's just a mess," Louise Sheiner, an economist at the Brookings Institution, tells NPR.
Even if a coin like that was feasible, "you wouldn't prevent the chaos in the debt market that we're all worried about from the debt ceiling breach," Sheiner adds. Treasury Secretary Janet Yellen even told CNBC that the coin was "a gimmick" that shouldn't be considered.
Pro: A debt ceiling holds up the dollar
Increasing the debt ceiling continuously helps to prop up the global value of the American dollar, and bursting it would mean "the US would lose its status as the world's 'safe' asset — a place where investors can be confident their debt will be repaid," Akin Oyedele writes for Insider.
Even coming close to the debt ceiling would "take a lot of confidence out of the market," John Velis, vice president of global macro strategy at State Street, tells Insider. Such a default "would certainly be felt on the dollar. The dollar has been weakening for a variety of reasons, but this certainly wouldn't make it more attractive if it looked like the U.S. couldn't do its basic functions as the provider of the reserve currency around the world."
Con: Raising the debt ceiling is irresponsible
Many House Republicans have a simple explanation for eliminating the debt ceiling — its continued increase is simply bad money management. Congress "can't just keep doing the same thing under the same conditions with the same management and expect different outcomes," Rep. Scott Perry (R-Pa.) tells ABC News, claiming that "the American people are sick and tired of this endless debt increasing."
The GOP-led House Budget Committee feels similarly, and writes that Congress must "'reverse the curse' of deepening deficits and debt by addressing the underlying reason that we are having to raise the debt ceiling to begin with: uncontrolled federal spending." The committee adds that the problem with the debt ceiling is that it allows for "wasteful, inefficient, and unnecessary federal spending."
Pro: Debt ceilings keep the government in check
Getting rid of the debt ceiling would eliminate a major check on the government, and "the bottom line is that the federal budget is a horrible mess, and Congress is to blame for it," Veronique de Rugy writes for National Review.
The debt ceiling is necessary to keep the budget normalized, de Rugy says, adding, "Congress has behaved irresponsibly for years." She adds that people criticizing the debt ceiling should be "upset about the symptom of the disease, not the disease itself."
Con: The debt ceiling is too politicized
"Policymaking in the United States has been reduced to grappling with whatever crisis looms largest," The New York Times wrote in a 2021 op-ed. While it was necessary a century ago, the ceiling "has not served a useful purpose in living memory. It endures only as a dangerous impediment to the necessary function of the federal government," the Times added.
Democrats often say they don't want to eliminate the debt ceiling because "Republicans would portray them as fiscally irresponsible," the Times said. However, by making this decision, "they are being fiscally irresponsible" themselves.
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