DOOMSDAY DEVICE — The signs on Capitol Hill suggest we might complete the Hail Mary pass, sink the three pointer at the buzzer — pick your favorite sports cliche — and avoid a catastrophic default with a last-minute deal to lift the debt limit. Because we usually do. But let’s get one thing clear: No one is winning this game. The result, assuming negotiators hammer out an agreement by early next week, will be nothing but a desultory tie, leaving the U.S. economy and everyone’s mental health unnecessarily dented. The only true answer to what has become a regular game of chicken with the global economy — between politicians who mostly don’t understand the global economy — is to abolish the debt limit in its current form. Kill it. Soak it in gasoline and toss in a match. Consign the debt limit to the hottest corner of hell. Because the debt limit, born of a World War I desire to not require a congressional vote every time Treasury needed to issue debt, has far outlived its usefulness. In the modern era, it has become a partisan weapon of mass destruction. The limit, which has absolutely nothing to do with controlling spending but only allows Treasury to issue debt to cover money already spent by Congress, became fully weaponized following the Tea Party movement that drove the GOP into Hill control in the second half of President Barack Obama’s first term. Prior to that, it had been mostly (though not universally) a snoozer of a vote, lifted scores of times with little ruckus, to do things like cover the costs of World War II. In 1979, Congress passed a bill called “The Gephardt Rule,” after then-Rep. Richard Gephardt who introduced it. That measure automatically lifted the debt limit to cover any spending already approved by the legislature. And the ensuing Era of Good Feelings saw 15 hikes with limited drama. The rule was repealed in 2011. Thus began a series of debt limit fights between Obama and congressional Republicans, including one in August 2011 that sparked the first credit downgrade in U.S. history. That drama rocked markets, slowed the economy and led to an austerity spending program that arguably suppressed growth for years. And it led directly to the “Fiscal Cliff” drama of late 2012 that required a New Year’s Day 2013 vote in Congress to avoid a giant fiscal constriction in the form of lower spending and higher taxes. During the Trump years, Republicans mostly rolled over for debt limit increases in part to cover deficits increased by Trump’s corporate and individual tax cuts. Which brings us to our current moment, where the GOP is once again wielding the limit as a cudgel to extact spending cuts and more stringent social program requirements out of the Biden White House to avoid default. Thankfully, economic damage has been limited thus far to some down days in the stock market and increased costs for insuring against any default on U.S. debt. Failure to make a deal and an actual default could lead to a collapse in global financial markets — which are underpinned by Treasury bonds — and would almost certainly tilt a still inflation-plagued U.S. economy into recession. And all for no good reason. “This is the fourth debt ceiling debacle in the past twelve years. Each one inches the nation closer to default and economic chaos,” Joe Brusuelas, chief economist at consulting firm RSM US, said in an email to Nightly. “It is past time to put this archaic and barbarous relic of the past to sleep. Permanently.” None of this suggests the U.S. is on a sustainable spending path or that long term debt isn’t a problem. It’s certainly not one at the moment, given continuing strong demand for U.S. debt and the size and power of the nation’s economy. But it’s the responsibility of Congress and the White House to agree on any long term changes to entitlements or other spending that reduce the size of the debt as a share of the nation’s economy. And to do it without the gun-to-the-head debt limit. This, as it happens, is my final time writing for you in POLITICO Nightly (and I’ve enjoyed every moment we’ve spent together). So let me go out with something I consider an absolutely non-partisan, common sense suggestion that would bring an end to this oft-repeated kabuki dance of economic insanity: Crumple up the debt limit, stuff it in the garbage and govern like grown ups. Welcome to POLITICO Nightly. Reach out with news, tips and ideas at nightly@politico.com. Or contact tonight’s author on Twitter at @EconomyBen. Ben is finishing up a great run at POLITICO, including writing some of our favorite Nightly pieces. Good luck to him in his future endeavors! Nightly won’t publish on Monday, May 29. We’ll be back in your inbox on Tuesday, May 30.
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