Treasury Secretary Jack Lew thinks it might be time to revisit the wisdom of the debt ceiling.
“I think the whole idea of debt limit reform is something we probably should think about,” Lew said Tuesday, citing the damage to consumer and business confidence that followed this year's and 2011’s political showdowns over raising the statutory cap on U.S. debt.
Fielding questions at a Wall Street Journal business event Tuesday morning in Washington, Lew dismissed the idea that the debt ceiling is valuable.
“It doesn't serve a useful purpose, because it doesn't really affect the policy,” Lew said. He added: “It cannot be that you get to the end of all of the taxing and spending decisions and say, the government can't pay its bill.”
However, Lew did not suggest abolishing the debt ceiling. He did call on Congress to raise it in a timely manner before the next time it becomes binding, projected to be sometime in February.
He stopped short of weighing in on the budget negotiations playing out between Senate Democrats and House Republicans in conference, saying that “anything they do that shows that they can kind of work together to just kind of chip away would be — kind of instill some confidence both in the process and in the substance.”
The debt ceiling applies to publicly owned debt issued by the Treasury. It does not constrain federal spending, only the Treasury’s ability to sell bonds to finance the expenditures already authorized by Congress.
All but one economist surveyed by the University of Chicago Booth School of Business' IGM Forum in January agreed with the statement that the debt ceiling creates unneeded uncertainty and can potentially lead to worse fiscal outcomes. Public opinion polls, however, regularly show strong majorities against raising the debt ceiling at all.