House speaker Boehner has laid-out what may be the most important government speech for 2011. In front of the Economics Cub of New York, the Speaker suggested that a dollar of debt ceiling could be expended for a dollar of deficit cuts. While this type of constraint would be unusual, there is past precedent for binding behavior. In fact, the only way to control behavior may be through a set of rules which limit activity.
An increase in the debt ceiling without any constraint on spending would mean that the debt ceiling would have no meaning. Any rules-based system has to have some penalty if standards or thresholds are breached. What some would like is a debt ceiling which does not have any consequences. If a new ceiling is hit it should be raised ago because the ill effects of not raising it would be so large. Taken to an extreme, the debt ceiling could be set each month and then raised each month if it is hit. If that would be the case, then there should be no debt ceiling at all. If the government cannot suffer any consequences and the market supposedly does not care, then it should be eliminated. However, the ceiling has been passed by the government in the first place to limit extreme spending behavior.
Reasonable constraints would be to require automatic cuts if the threshold is hit. Since that may occur at the wrong time, the alternative would be to tie cuts to a raise in the limit prior to passage. Since the debt ceiling is supposed to apply for a lengthy period, (in the extreme that should be forever), a cut in long-term spending in exchange for an increase would be reasonable.
An increase in the debt ceiling without any constraint on spending would mean that the debt ceiling would have no meaning. Any rules-based system has to have some penalty if standards or thresholds are breached. What some would like is a debt ceiling which does not have any consequences. If a new ceiling is hit it should be raised ago because the ill effects of not raising it would be so large. Taken to an extreme, the debt ceiling could be set each month and then raised each month if it is hit. If that would be the case, then there should be no debt ceiling at all. If the government cannot suffer any consequences and the market supposedly does not care, then it should be eliminated. However, the ceiling has been passed by the government in the first place to limit extreme spending behavior.
Reasonable constraints would be to require automatic cuts if the threshold is hit. Since that may occur at the wrong time, the alternative would be to tie cuts to a raise in the limit prior to passage. Since the debt ceiling is supposed to apply for a lengthy period, (in the extreme that should be forever), a cut in long-term spending in exchange for an increase would be reasonable.
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