The Debt Ceiling Can Force Budgetary Discipline | Opinion

The following is a lightly edited transcript of remarks made by Phil Kerpen during a Newsweek podcast debate on the debt ceiling. You can listen to the podcast here:

The debt ceiling is the statutory limit of the total debt that the federal government is allowed to accumulate and maintain at any given time. And so it sets a statutory ceiling, essentially, on the total amount that the federal government is able to borrow. Historically, up until around 100 years ago or so, every time Congress did a spending bill, they would also authorize a new level of debt if the government was operating in deficit at that time. And so they would do it on a continuous basis. And then they decided that it was more convenient and more politically advantageous to set an overall level and then come back to it periodically when it was reached.

Over the last several years, they've stopped even doing that. Instead of setting an overall level, they suspend the debt ceiling until some given date in the future. Then they say it'll automatically become however much debt is accumulated on that date.

So this is essentially a suspension of the debt ceiling, but it also eliminates the function that it's played in practice: For the past three or four decades, every time there's been a major deficit-reduction law or a major spending cap deal, it's been driven by a fight over the debt limit. Essentially, one side or the other politically says, we don't want to raise the debt ceiling again. We need to do something to change our long-term fiscal trajectory. And then you get kind of these landmark deals. The first in the 1980s was the [Gramm–Rudman–Hollings Balanced Budget and Emergency Deficit Control Act]. And there was a sequel to that a couple of years later. And then the most recent one in 2011 was the Budget Control Act, which created the "super committee," which failed—and then it created the sequestration mechanism, which, although it created a lot of problems in its specifics, was actually very effective as a limitation on spending.

We're overdue for another one of those deals because it's been 10 years and we've racked up a really astonishing level of spending and debt, in particular over the last year and a half. And so now we've got this fight where the Democrats want to do another suspension. They don't want to put a number on it. And the Republicans have basically said: Look, you want to spend trillions in addition to all that has already been spent on COVID, and you're not taking any of our input on policy. And so, if you want to accumulate a higher level of debt, you've got to do it with Democratic votes and put a number on it. And Democrats are not very happy about that. And so that's kind of where we are right now. The Treasury has said that October 18 is the so-called "X" date, where they won't be able to meet all of the federal government's obligations without raising the debt ceiling. So, we're sort of on the clock.

Phil Kerpen is president of American Commitment.

The views expressed in this article are the writer's own.