Previous debt-ceiling fights have been destructive
The reason is an abstruse mechanism called the debt ceiling. Since 1917, Congress has, in one form or another, retained a limit on the amount of debt the Treasury can issue. Because Congress tends to run budget deficits, this has needed raising or suspension more than 100 times since its inception. The only other Western country to retain a similar debt limit is Denmark, though it is set much higher than actual debt and is thus not close to “binding”.
. In 2011, Republicans brought the country close to the brink of default in order to force budget cuts, resulting in a downgrade to the country’s credit rating for the first time. Borrowing costs for the federal government rose by $1.3bn in that year alone. Another near-miss came in 2013, when Republicans unsuccessfully tried to force Barack Obama to defund his signature health-care programme. This time, though, Republicans do not seem to have any policy objectives.
That deal only offers a temporary reprieve to this maddening cycle. What were once emergency measures are now routine. The Treasury must employ “extraordinary measures” to stave off an imminent default so often now that they are barely noticed. These had been in effect since August. Another round may begin when the December deadline approaches but eventually they will be exhausted, a new x-date will arrive, and frantic negotiations will begin again.
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