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Scrap the debt limit, some lawmakers and economists say

Amid another battle over the limit, several House Democrats propose ending it. Many economists agree with the idea, but Republican leaders do not.

January 22, 2013|By Jim Puzzanghera and Don Lee, Los Angeles Times

Denmark is one of the only nations that has a debt limit similar to the U.S. It was enacted in the early 1990s during an administrative reorganization that shifted management of the country's debt to the independent Danish central bank, said Kirkegaard, a native of Denmark.

But the limit was set high enough that it would not have to be raised for years. When debt began approaching the limit in 2010, Denmark doubled the limit, Kirkegaard said.

Congress uses its debt limit much differently. Some increases in recent years were just enough to allow for a few months of borrowing.

And that's just what House Republican leaders plan to do again by authorizing a temporary suspension of the limit to give Congress time to pass a budget. The limit would automatically adjust May 19 to cover additional borrowing up to that point.

House Speaker John A. Boehner (R-Ohio) has said he would support a long-term increase only if it was offset by spending cuts that exceeded the amount of the debt-limit hike.

Keith Hennessey, who was a top White House economic advisor during the George W. Bush administration, said the debt limit is important in a time of soaring deficits and a dysfunctional Congress that has not passed a formal budget since 2009.

Instead, Congress has been approving a series of short-term spending bills that fail to address the budget deficit. Hennessey likened such hikes to a creditor giving a troubled company just enough money to continue operations until it can fix its finances.

"Nobody wants to do short-term debt-limit increases," he said. "But if the alternative is we keep stumbling toward long-term fiscal decline, I think it's necessary."

Rep. Jerrold Nadler (D-N.Y.), however, said the debt limit is "totally useless" and has become more of a threat than a help to the nation's economic well-being.

"Let's abolish the debt ceiling, and if people think we're spending too much money, vote to spend less money," he said.

jim.puzzanghera@latimes.com

don.lee@latimes.com

Times staff writer Lisa Mascaro in Washington contributed to this report.

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