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Moody’s wants the debt ceiling gone

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Moody’s wants the US to eliminate the debt ceiling entirely. This is very, very good policy. Denmark is the only other country with a comparable setup, and other developed countries seem to get on fine without it. Indeed, the U.S. got on fine without it between 1979 and 1995, when the “Gephardt rule” meant that spending bills that increased the debt automatically increased the debt ceiling as well.

But it’d also be smart politics for Obama to insist on full elimination of the debt ceiling, rather than a temporary increase. The current setup means that every year he needs the House GOP to sign on to both a budget and/or continuing resolution AND an increase in the debt ceiling. That means two occasions every year where John Boehner has leverage to demand policy changes. Eliminating the debt ceiling would cut in half the number of standoffs like that.

Then again, it’s also possible that Obama wants Boehner to have leverage, as Obama’s policy preferences lie to the right of those of House Democrats, and giving Boehner more power allows him to sell cuts to his party that it otherwise would not support. In that case it would make perfect sense for Obama to not push to eliminate the debt ceiling entirely.

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