But holding up a debt-ceiling increase over spending is a bad idea, the Obama administration says, echoing a similar argument made by President Kennedy’s Treasury secretary 50 years ago, as The Economist’s Greg Ip pointed out in a Tuesday morning tweet.
In 1963, Treasury Secretary Douglas Dillon delivered a speech at a University of Connecticut awards luncheon—reproduced in the pages of the New York Federal Reserve’s monthly review—that argued that no fiscal-policy issue was “in need of more light and less heat as the debt limit.” And his arguments are strikingly familiar.
“[L]et no one labor under the delusion that the debt ceiling is either a sane or an effective instrument for the control of federal expenditures,” he said.
Hitting the ceiling would force the government to delay paying its bills, Dillon argued. It’s an idea central to one modern plan to avert a debt default, but it comes with economic consequences, he said.