Tags: debt | ceiling | spending | Becker

Economists Becker and Lazear: Debt Ceiling Just Encourages More Spending

Friday, 25 Oct 2013 09:17 AM

By Dan Weil

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Although Washington focused last week on raising the debt ceiling, the whole ceiling idea is a bad one, because it spurs increased spending, say Nobel laureate economist Gary Becker and Edward Lazear, chairman of President George W. Bush's Council of Economic Advisers.

"A debt ceiling may seem like a good way to constrain out-of-control government, by focusing attention on the federal deficit and the resulting debt increase," they write in The Wall Street Journal.

"But that focus draws attention from the underlying problem: too much spending."

Editor’s Note:
New Video: Obama Plans to Redistribute Seniors’ Wealth

People think a debt ceiling will control borrowing. "Yet the U.S. debt hits the debt ceiling time and again because the federal government runs chronic deficits," Becker and Lazear contend.

Excessive spending has forced Congress to boost the debt limit 15 times since 1993, they note.

The solution is a rule to directly control spending. "Spending growth should be limited in a way that brings government outlays back down to historic ratios relative to GDP," Becker and Lazear write.

"This would place the attention where it belongs, on spending rather than on the difference between outlays and receipts."

Stephen Kaplan, professor of political science at George Washington University, also favors eliminating the debt ceiling, though he comes from a different angle.

"Endowing the U.S. Treasury with automatic authority to fund congressionally approved spending will help mitigate . . . uncertainty," he writes in a Washington Post blog.

"Otherwise, political battles over the debt ceiling may leave the U.S. economy devoid of its most important insurance: its cheap financing for governments, firms and households."

Editor’s Note: New Video: Obama Plans to Redistribute Seniors’ Wealth

Related Stories:

Slate's Yglesias: GOP Should Offer to Eliminate the Debt Ceiling

El-Erian: Congress' Antics Are Not Mere Flesh Wounds for Economy

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