The Recurring Debt Limit Crisis — Kicking the Can Down the Road
On Friday, the US Secretary of the Treasury, Janet Yellen, warned the US must take “extraordinary measures” to avoid defaulting on its debt as soon as January 19. Yellen explained she would impose those extraordinary measures until Congress agreed to raise the debt ceiling — again. Welcome to the latest round of the debt limit crisis.
What Is the Debt Ceiling
The debt ceiling is an imaginary line imposed by Congress 106 years ago to restrict irresponsible spending. It limits the amount of money the government can borrow, placing a cap on government spending. That was the idea in 1917, anyway. Today it is the instrument that sets off perennial alarms among think tanks and the media. As the US consistently hits the debt limit more and more frequently, economists warn that failure to raise the debt ceiling will result in “ financial Armageddon.”
There is some truth in this. The global economy is pegged to the US economy. The most reliable investment in the world is US debt. If the US defaults on its debts, that will set off a ripple of economic repercussions unlike anything experienced in the post-World War II era.
Still, the cries to raise the debt ceiling inspire a sense of bewilderment among those whose view of the world is rooted more in common sense than politics. If a diabetic person tests their blood sugar levels and learns they are approaching dangerous levels that border on hyperglycemia, the solution is not to adjust the levels of what is safe and appropriate and redefine the danger zone. The answer is to change the diet, lifestyle, and medications impacting their blood sugar.
That is the logic of a different age, though. As we approach the danger zone with the debt ceiling for the second time in less than two years, the solution (again) is to raise the debt ceiling rather than adjust the habitual inputs (spending), which leads to excessive debt.
JB Shreve is the author of “How the World Ends: Understanding the Growing Chaos.” He has been the host of the End of History podcast since 2012. He has degrees in International Relations and Middle East Studies. His other books include the Intelligence Brief Series. Regular posts and updates from JB Shreve are available at www.theendofhistory.net
Originally published at https://theendofhistory.net on January 14, 2023.
