Josh Barro on the Debt Limit

http://www.futureofcapitalism.com/2011/05/josh-barro-on-the-debt-limit

The Walter B. Wriston Fellow at the Manhattan Institute, Josh Barro, has an op-ed piece arguing against Republican efforts to link a debt limit increase to spending cuts. He writes: "The best course would be for Congress to avoid a cash shortfall by passing a clean debt limit increase — or simply abolishing the debt limit altogether."

The limit certainly hasn't done much to restrain government spending. On the other hand, without it, it's possible things could be even worse. The real limit on government debt relates to how much of it the bond market is willing to absorb, and at what interest rate. But the Federal Reserve's willingness to buy government bonds makes even that limit flexible, up to a point.

This is the same Mr. Barro who earlier called for "a significant tax increase."

On the debt limit point, I think Marco Rubio had the better of the argument in his Wall Street Journal piece headlined "Why I Won't Vote to Raise the Debt Limit":

"Raising America's debt limit is a sign of leadership failure." So said then-Sen. Obama in 2006, when he voted against raising the debt ceiling by less than $800 billion to a new limit of $8.965 trillion. As America's debt now approaches its current $14.29 trillion limit, we are witnessing leadership failure of epic proportions.

$14.29 trillion is a big number, as is the amount of it that has been accumulated since 2006.

by Editor  |  May 11, 2011 at 10:09 am Related Topics:  Federal Reserve, Government Spending, Non-Profits receive the latest by email: subscribe to the free futureofcapitalism.com mailing list