Your Key Takeaways:
– President-elect Donald Trump pushes to extend or scrap the debt ceiling in the GOP spending package.
– Analyst Heather Long believes this move might benefit the Democrats when they return to power.
– The debt ceiling, akin to a credit card limit, doesn’t prevent spending but approves spending that’s already occurred.
– Removing the debt limit would prevent the recurrent artificial crisis and potential economic harm due to default threats.
President-elect Donald Trump has made another striking demand, stirring the financial debate within the country. He urges the GOP to tweak the spending package to prolong or entirely wipe out the debt ceiling. While some are skeptical towards this move, Heather Long, a columnist, sees a silver lining for the Democrats.
The Debt Ceiling Tale
The debt limit is a figure the U.S. government is allowed to borrow. Think of it like your parents’ credit card limit. Born during World War I, it was meant to ensure the government could easily borrow funds for wars. Over time, it served as a cue to minimize government spending.
That happened decades ago, though. Now, as our national debt has grown from $7 trillion in 2004 to $35 trillion, the debt ceiling seems less significant. What’s the point of having a credit limit if we’re racking up massive debts anyway, right?
The Debt Ceiling Fallout
As it turns out, the debt ceiling isn’t all it’s cracked up to be. It doesn’t stop the government from spending money. It only offers a thumbs up to spending that’s already happened. Like when you buy something expensive on your parent’s card and then ask for permission.
Worse yet, this creates a cycle of the party not in power making a fuss over spending without making any real changes. It’s like a drama fest over who spends money the best, while all along, the spending continues. Sometimes, to make a point, they almost cause a default. That’s like not paying your credit card bill on purpose. It could send the global economy down the drain.
The Debt Ceiling Debacle Fix
So why not simply get rid of it and stop the cycle of artificial crisis? That’s exactly what Long argues should be done. Not only once but twice, back in 2011 and 2023, House Republicans dragged us to the brink of defaulting on our debt. And the mere threat of not paying back loans had wide-scale economic impacts.
Our borrowing costs climbed. Credit rating agencies knocked our debt rating down a peg. And after last year’s tussle over the debt limit, Moody’s declared our debt outlook ‘negative’. I’m sure you can tell, that’s not good news.
This is why people with wildly different viewpoints, from Wall Street bankers to Democratic Senator Elizabeth Warren, are all for abolishing the debt ceiling.
Seize the Moment, States Long
While Trump’s motivations for wanting to get rid of the debt ceiling might be suspect, Long asserts that his stint in the White House will not last forever.
Abolishing the debt limit now could greatly benefit the country in the long run. It would eliminate the worst-case scenario of a default due to Congress’s inaction. Also, it wouldn’t camouflage the trillions of dollars that Trump has added to the national debt during his first term, and likely to continue in his second.
To end, Long’s perspective offers a refreshing view of Trump’s proposed change to the debt ceiling. Time will tell if this fiscal strategy will indeed play out in favor of future administrations. Regardless, it underscores the need for careful consideration and informed decision-making in managing the country’s ever-increasing debt.