Regretting raising the debt-ceiling
By Donald Boudreaux
The opinions expressed are his own.
Reuters invited leading economists and writers to reply to Larry Summers’ op-ed on his reaction to the debt ceiling deal. We will be publishing the responses here. Below is Donald Boudreaux’s reply. Here are responses from Laura Tyson, James Hamilton, Robert Frank, Russ Roberts, Benn Steil and James Pethokoukis as well.
Larry Summers’ cynicism about the new debt deal is justified. What, indeed, is the baseline from which $1.5 trillion is to be subtracted?
That there’s no clear answer to this question — and that there’s no serious effort to avoid the coming explosion of entitlement spending — drives home the truth that this deal really is nothing more than, as The Economist describes it, “a mishmash of expedient stop gaps and promises.”
My objections to the entire debt-ceiling brouhaha, however, run more deeply than those of Prof. Summers.
Unlike him, I dispute the claim that failure to raise the debt-ceiling would have been a calamity. Sure, failure to raise the debt-ceiling would have prevented Uncle Sam from doling out as much money as he promised to dole out to countless numbers of people counting on moola from Washington. But even without a higher debt ceiling, the government’s cash flow would have been more than adequate to pay all of its genuine creditors in full. No actual default would have been necessary.
What would really have been necessary is more accurately described as belt-tightening.
That each of the many programs that stood to be squeezed has a vocal support group is insufficient reason to avoid squeezing those programs. This fact is no less true for sacred cows such as Social Security, Medicare, and foreign wars than it is for federally subsidized bridges-to-nowhere and other such boondoggles.
Elected officials perpetually and proudly proclaim their willingness to “make tough choices.” Those proclamations are meaningless, however — as has been true from 1917 (the year the first debt-ceiling was adopted) through to this very day — if Uncle Sam can borrow as much money as he wishes without constraint.
If the debt-ceiling were a real constraint, rather than a mere public-relations gimmick, members of Congress and the President would then be truly obliged to make the tough choices that they always claim they make but in fact never make.
I regret the raising of the debt-ceiling because I regret relieving Congress and the President of a serious obligation to actually make tough choices on how they spend what is, let us never forget, other people’s money.