Federal debt limit in the United States: The perverse impact of an outmo ded control mechanism

John L. Mikesell

Abstract


The federal government of the United States imposes a legal limit on its debt under an old system of fiscal control. Because the government operates close to that limit and alsohas been operating with a sizable deficit, this statutory limit must be regularly raised. Although Congress approves the spending programs and revenue structure that produces the deficit, in recent years some members of that body have chosen to use the debt limit as a method of controlling deficit increases. However, constraining debt increases does not constrain spending, but rather only constrains the ability to pay the bills for the spending. That constraint, after spending has occurred, creates the prospect of default and endangers the national credit rating.

Keywords


debt limit; deficit; credit rating; US government; budget; appropriations

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"Business Systems & Economics" ISSN online 2029-8234