How "debt ceilings" increase debt

Here is how the debt-ceiling battle lines are drawn: Liberals want to raise taxes to cut deficits, while conservatives want to lower government spending. Yet the substantial growth in federal spending during the past 50 years under both Democratic and Republican control of Congress and the presidency suggests that the many debt ceilings during this period did little to reduce the size of government.

Furthermore, the almost ubiquitous deficits during the same period suggest that the ceiling has not even been effective at controlling the deficit. The debt ceiling may result in a complacency that can even be harmful. If members of Congress believe that they will always have another shot at spending control, they may be more lax when authorizing government spending in the budget process or, more recently, through continuing resolutions.

There is evidence at the state level of how harmful this kind of behavior can be. Many states are required to have “balanced” budgets, but the growth in spending and the size of state governments continues apace. During good times, when tax revenues are high, states “balance” their budgets by spending at the high levels consistent with large revenues. When times get tough, it is difficult if not impossible to eliminate programs that had been initiated during the fat years. Instead, the states resort to budgetary gimmicks, like delaying shortfalls until next year’s “balanced” budget.

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