Political Tool vs Policy Instrument: History, Politics, and Economics of the Debt Limit

• In Event: Interest Groups and Public Policy

Abstract

Being charitable, The Brookings Institute has described the debt ceiling (a.k.a. the debt limit) as a “political hot potato” (Belz, Campbell, Stojanovic, and Wessel 2019). The issue of whether or not to expand the government’s continued ability to borrow money to meet its statutorily mandated spending enters our political discourse with great regularity. This work is the starting point of a larger project examining the history, politics, and economics of voting to increase the government’s “credit limit”, the amount of money it can legally borrow to meet its spending obligations.
Cooke and Katzen (1954) noted how contemporary discussion then “aroused current interest in the history and development of the debt limit.” Such debates and the process they deal with date back to 1939. For most the early part of U.S. history the debates were rare. The occasions of debate have increased over time, but are far more frequent in the 21st century. Debates and brinksmanship over the debt limit will, no doubt, be a regular part of our politics. We review the literature that establishes the framework for such debates, including the legislative history of the debt ceiling, a brief history of the partisan confrontations over it, and explore how the debt ceiling has come to be more of a political tool than a once routine policy instrument. Lee (2013) notes that political incentive structures have changed. With no end to partisan polarization apparent on the horizon, it is important to study the phenomenon of debt ceiling debates.

Authors

• Jim Twombly, Elmira College

• Robert Irons, Illinois Wesleyan University