By: Dr. Lynn Reaser
As the clock ticks down to the expiration of the nation’s debt ceiling, fears are mounting over the possible impact on social security recipients, federal employees, holders of U.S. Treasury securities, interest rates, and stock prices. Should the U.S. do away with legislative limits on the size of its debt?
The answer is “no”. Since 1917, the U.S. has maintained some kind of law restricting the size of the national debt. While the possibility of breaching the current debt limit poses serious financial and economic risks, the President and Congress have kicked the can down the road for too long. The Congressional Budget Office projects that in 25 years, our debt will reach 100% of GDP, higher than any year except 1945 and 1946. Debt will be growing faster than GDP, an unsustainable path, threatening any future rise in living standards.
Budgetary limits or rules may be the only way to achieve fiscal discipline.