The dreaded debt ceiling is back. We were scheduled to hit it on Monday, which would mean the government couldn’t borrow any more money, and would default on its debts.
But the Treasury Department has raided various cookie jars, and now says it has enough money to last another two months. Congress used to raise the debt ceiling automatically. Not now. And the debt debate has spilled over into economic circles. With some economists saying, why worry?
Raising the Debt Ceiling: A Timeline
Do you know how many times the debt ceiling has been raised since 1940? View our interactive timeline to see each time the debt ceiling was raised, which party was in office at the time, and how close we got to hitting the debt ceiling. View more.
They say, this is a good time to borrow. The government is paying very low interest rates, and investors are snapping up our debt. Even as it piles up. So, if investors aren’t worried, why should we be?
Dean Baker is one of the leading don’t-worry-about-the-debt economists. He’s co-director of the Center for Economic and Policy Research. I asked him, what’s the tipping point? When would he start worrying about our red ink? He says to think of our indebtedness as a cross-country road trip.
“It’s sort of like if we’re driving west and we’re in Ohio,” he explains. “If you keep doing that you’ll hit the Pacific Ocean. But you really don’t have to worry about it when you’re in Ohio.”
He says our borrowing props up the economy. And we could even borrow more, maybe do more stimulus spending. Other economists are more middle of the road.
“Well there’s a reason to be concerned, but there’s no reason to go overboard,” says Mark Vitner, senior economist at Wells Fargo.
Vitner says it’s kind of like we’re driving merrily down the debt highway, not realizing we have high blood pressure.
“And the doctor tells ya, you know your blood pressure is a little high,” he explains. “You’re overweight. Nothing that you have to do immediately but if you don’t do it over time there’s going to be some serious repercussions. And that’s what we face with this debt burden.”
Plus, the longer we wait, the harder it is to change bad habits. Lewis Alexander is chief U.S. economist at Nomura Securities and says we can make gradual changes over time if we start whittling away at the debt now.
“Now that does not mean we have to have a massive fiscal consolidation tomorrow,” he explains. “But it does mean we need to sort of address these long term trends and put ourselves on a better track.”
One that does not dump us unceremoniously into an ocean of debt.