Debt Limit Hasn't Helped
May 8, 2003
The idea of an artificial ceiling on government borrowing dates to World War I, when Congress gave general borrowing authority to the Treasury but retained the power to limit how much. Now every time Treasury needs a higher debt limit to prevent a federal default, it must petition Congress. Lawmakers inevitably raise the limit but not before staging a political melodrama to give the impression that Congress actually cares about federal debt.
Last year, the debt limit was raised by $450 billion to $6.4 trillion. Treasury says that unless it's raised again, and soon, the United States may not be able to pay bills due later this month.
- However, the $6.4 trillion "debt-limit" figure excludes the debts of such government-sponsored enterprises as Fannie Mae and Freddie Mac.
- In 2001, the combined debt of GSEs totaled $3.1 trillion.
- Also left off Uncle Sam's official ledger are Social Security and Medicare liabilities, which came to more than $6 trillion as of fiscal year 2000.
According to economist Bruce Bartlett, "the federal government would need to have $13 trillion in the bank today, earning interest, to pay all of the Social Security commitments that have been made, over and above future revenues under current law." Thus, as a tool for controlling taxpayer liabilities, the debt limit hasn't been much help.
Source: Editorial, "Debt Limit Follies," Wall Street Journal, May 7, 2003.
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