Editorial: Janet Yellen is right. The debt limit is dangerous and should be abolished

Congratulations to Congress for avoiding economic catastrophe for another month or so. The Senate voted Thursday night to increase the nation’s debt limit by $480 billion, and the House is expected to do the same early next week. That’s just enough money to pay America’s bills until Dec. 3, when Congress will likely have this fight all over again while the nation teeters on the edge of default.

Can we get off this idiotic merry-go-round?

The semi-regular debt limit fight is politics at its worst. Why? Because raising the federal debt limit should be a routine, obligatory act by Congress to fulfill the government’s basic duty to pay the bills run up by the very same Congress.

Instead, the debt limit has become a prop in Washington’s Political Kabuki Theater. One party — usually the GOP — refuses to vote to raise the debt limit, while bemoaning the amount of federal spending and the size of the deficit. The other party scrambles for strategies or concessions to get the votes. While the standoff plays out, the U.S. inches closer to the moment when it runs out of cash and can no longer borrow to meet its financial obligations, which include Social Security payments and reimbursing hospitals for Medicare patients.

A default could be devastating to the American economy, which is still struggling from the pandemic shutdowns, and trigger a recession. But even if Congress somehow gets its act together and raises the debt ceiling again before December, the constant brinkmanship and last-minute scrambling undermines confidence that U.S. Treasuries are a stable, predictable investment. That could hurt the nation’s economy in the long run, Treasury Secretary Janet Yellen has warned.

“It’s led to a series of politically dangerous conflicts that have caused Americans and global markets to question whether or not America is serious about paying its bills,” Yellen said Thursday on CNN. That’s why she has endorsed eliminating the debt limit. And she’s right.

Congress established the debt limit more than a century ago. In theory, it is supposed to encourage fiscally responsible behavior. In practice, the debt limit is largely ignored until the U.S. hits it. That’s why the current version makes no sense. The debt limit doesn’t actually stop Congress from running up debts. It merely stops the Treasury from borrowing the money needed to pay federal creditors, pensioners, investors and others to whom Uncle Sam owes money.

The debt limit is an irresponsible way to manage the nation’s obligations, and it’s time to get rid of it.

There is a value in having some mechanism to constrain spending, or at least force a meaningful debate over whether the expense justifies the debt. Over the years, there have been countless proposals to reform or replace the debt limit, such as those from the U.S. Government Accountability Office and the nonpartisan anti-deficit group, the Committee for a Responsible Federal Budget. The core recommendation is to more closely link decisions about spending and borrowing.

But for now, the best course for Congress is to repeal the debt limit, and put an end to this dangerous brinkmanship.