For the past century, Congress has imposed a statutory limit on how much the United States can borrow. In theory, this limit is supposed to impose fiscal discipline upon spendthrift politicians.
In practice, it does no such thing.
The debt ceiling doesn't actually restrict how much Congress can spend. It merely restricts the Treasury Department's ability to pay bills Congress has already incurred. Year after year, Congress has passed budgets that authorize spending well beyond expected revenue, then raised the debt ceiling so that Treasury can borrow to make up the shortfall.
As a result, the main role of the debt ceiling in recent years has been as political hostage. Every year or so, when it comes time to raise the debt limit, attention-seeking politicians demand concessions in exchange for their precious votes.
This strategy is attractive because everyone (well, almost everyone) knows that defaulting on our debt would be disastrous.
It would make the United States a deadbeat, jeopardizing our ability to continue paying basic obligations such as Social Security checks, military salaries and interest payments.
Not to mention that it would violate the Constitution, which says, "The validity of the public debt of the United States . . . shall not be questioned."
It would also send the global financial system into a tailspin.
U.S. debt is considered the safest of safe assets, which is why lots of other financial products are benchmarked to U.S. Treasury yields. If our creditors doubt they'll receive full and timely payments, Treasury yields will rise, setting off a chain reaction of chaos and panic in markets throughout the world.
Now, technically, we already reached our borrowing limit in early December. Since then, Treasury has been resorting to "extraordinary measures" to prevent default. This essentially means moving money around so we can meet our obligations without issuing new debt.
At some point, though, those measures will get exhausted. And that some point is coming sooner than previously expected.
In November, the Congressional Budget Office projected that Treasury would run through those extraordinary measures around late March or early April. But then Republicans passed their ginormous tax bill.
The new law cuts taxes for most Americans this year, which means that withholding from employee paychecks will drop starting no later than mid-February. Individual income tax revenue will therefore be about $10 billion to $15 billion less per month than the CBO previously estimated.
Thus, the CBO says that Treasury will probably run out of money in the first half of March, possibly sooner. In a letter this week to House Speaker Paul D. Ryan (R-Wis.), Treasury Secretary Steven Mnuchin understandably pleaded with Congress to "protect the full faith and credit of the United States by acting to increase the statutory debt limit as soon as possible."
Not raising the debt ceiling once seemed totally unthinkable. These days, less so.
We came dangerously close to default in 2011, prompting Standard & Poor's to downgrade the country's creditworthiness. Since then, the nation's political leadership has only deteriorated.
During the presidential campaign, then-candidate Donald Trump made distressingly cavalier comments about defaulting on our debt. Then, when he assumed office, he appointed as his top budget honcho Mick Mulvaney. Mulvaney had been one of the ringleaders of the 2011 debt-ceiling showdown, voted against raising the limit four times and publicly questioned whether it would be so bad if we stopped paying all our bills.
Congress, meanwhile, has a lot of other time-sensitive issues on its plate right now, including passing a budget and negotiating an immigration deal that will (hopefully) protect "dreamers."
Ryan has also not exactly proven adept at herding all the cats in his party. Republican lawmakers have lately been rewarded for grandstanding and going rogue, which hardly suggests they'll fall in line when a delectable hostage such as the debt limit is there for the taking.
The best thing Congress could do at this point would be to eliminate the debt ceiling once and for all. But barring that, resetting the doomsday clock for another year — swiftly, well before markets begin to panic — would still be better than nothing.