The debt limit was intended to force lawmakers to be fiscally responsible. The thought was that if they reached the limit and faced a default, this would pressure them to raise taxes or restrain government spending. That’s not how it has worked. Instead, often after much drama, lawmakers raise the limit just in time to avoid a default but without making difficult choices on taxes or spending.
This sets an ugly precedent for future debt limit battles: The party in power will have to resolve the debt limit without help from the other. Given the greater political degree of difficulty this entails, it heightens the risk lawmakers won’t get it done before the government defaults, or forces them to take bizarre steps with other serious consequences to avoid a default.
Not so fast. Not only does the platinum coin blow up the constitutional separation of powers between the Congress, which has the power of the purse, and the executive branch, but global investors surely would be spooked by such a ploy. They will rightly figure that the US government is so dysfunctional that its action will lead to runaway inflation, undermining the value of their bonds. Financial markets would be thrown into turmoil.
This leaves us with the most logical and least painful way to address the debt limit: an exception to the Senate’s filibuster rule for the debt limit. That is, when it comes to increasing the debt limit, the Senate can end a filibuster and pass legislation with a simple majority, rather than with the 60 votes required under current rules. Given that the debt limit is so counterproductive that even threatening to breach it does economic damage, lawmakers should significantly lower the political bar necessary to increase it.
That the US government pays what it owes in a timely way is a bedrock of the US economy and global financial system. It has paved the way for the US dollar ultimately to become the global economy’s reserve currency. The economic benefits of this over the generations are incalculable. Lawmakers should put an end to the wrangling over the debt limit so future generations can enjoy the same benefits.
Read More:Economist: Congress should’ve killed the debt limit a long time ago. Here’s what it should do now