It's time to reform the debt limit statute, because it's doing nothing more than arming our tiny toddler Congress with Nerf Rapid Strike Blasters powerful enough to hold the government, public and underground Capitol subway hostage.
Congress established the debt limit when it passed the Second Liberty Bond Act of 1917. The statute prevents the U.S. Treasury from issuing new public debt upon hitting the limit, forcing the president to go to Congress and ask for an increase.
Although the rationale for a debt limit is sound, it's meant to prevent the government from overspending; it doesn't work because, for one, there have been some 70 increases over the last several decades. Extending the debt limit is one of the main reasons for the numerous government shutdowns occurring since the 1970s.
The current law gives partisans a means to blast the economy with impunity. If we assume that the benefits of the law are supposed to be greater than the costs, this law is all costs and no benefits.
The problem with debt limit is it kicks in on the back end, after Congress commits to fiscal obligations. The limit should kick in on the front end. Annual omnibus spending bills should include provisions that not only limit how much the government can spend during the year, but also provide incentives for coming under budget and punishments for going over (perhaps shutting down ineffective pork barrel programs and other discretionary spending items). Moreover, a reformed debt limit should be tied to budgetary reform and deficit reduction.
Rather than increasing the limit every year, it should be reduced so as to spur the government to lower spending. It should also be much harder to increase – perhaps a 2/3 majority approval for an increase rather than a simple majority in both houses of Congress – and be difficult to be used as a shutdown switch. A reformed statute also should prevent the Treasury from enacting extraordinary measures that ultimately hurt the economy.
An effective debt limit must end with the protection of the common good, and be tied to a long-term solution that puts the country in the black, not be one that makes running an efficient, effective government impossible. It's time to stow this hyper partisan Nerf Blaster back in the toy box.