The U.S. has staved off an economic calamity after President Biden signed a bill lifting the debt ceiling for two years in exchange for spending cuts. The president’s signature ended weeks of high-stakes negotiations between the White House and top House Republicans, culminating in legislation that passed both chambers of Congress with large bipartisan majorities.
Was all of the posturing, politicking, and doomsaying worth it? The U.S. first instituted a debt limit in 1917 to facilitate federal borrowing during World War I. The only other country in the world that has a debt ceiling set at an absolute amount of money is Denmark. Is it fair to ask if the debt ceiling is an unnecessary headache whose fiscal utility disappeared long ago, only to morph into a weapon of political opportunism?
Joseph Cordes is a professor of economics, public policy and public administration, and international affairs at the George Washington University. Cordes is an economist who possesses decades of experience working with and for several federal agencies, including the U.S. Department of the Treasury and the Congressional Budget Office. Here is what Professor Cordes had to say about the current and future relevance of the debt ceiling.
It was meant as a way to restore, as people saw it back then, fiscal discipline. It wasn’t really seen as a kind of cudgel that one side could use against the other. It really doesn’t serve that much of a useful purpose.
It has nothing to do with new spending at all. It has everything to do with having the liquidity that you need to make good on the promises you already made.
To schedule an interview with Professor Cordes, please contact GW Media Relations at [email protected].