Reporter Makes Case For Ditching Debt Ceiling

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In the latest issue of The New Yorker, James Surowiecki argues that the United States doesn't need and shouldn't have a debt ceiling. Mary Louise Kelly talks with Surowiecki about his reasoning.

MARY LOUISE KELLY, host:

Okay. Here's the latest on the debt standoff. House Speaker John Boehner has been forced to postpone a vote on raising the debt ceiling until tomorrow.

STEVE INSKEEP, host:

Turns out, his plan has limited Republican support. And, a bit of an embarrassment here, congressional budget officials say Boehner's plan would cut spending by less than he initially said - less than a trillion dollars over the next decade instead of the promised $1.2 trillion. So Boehner and his supporters are rewriting the legislation.

KELLY: Now, here's a different take on the standoff from New Yorker writer James Surowiecki. Surowiecki argues the United States doesn't need and shouldn't have a debt ceiling.

Jim Surowiecki, hi there.

Mr. JAMES SUROWIECKI (Journalist, The New Yorker): How you doing?

KELLY: So let's tick through some of your arguments for why the U.S. should get rid of the debt ceiling. Number one, you argue most other democracies don't have one.

Mr. SUROWIECKI: Yeah. The only developed country that, you know, kind of industrial country on our level that does have one is Denmark. And, you know, most other countries, developed countries, seem to do reasonably well in terms of keeping their books in order without one.

KELLY: And part of your argument is that the only reason the U.S. needs to lift the debt ceiling in the first place is to pay for spending that lawmakers in Congress have already approved.

Mr. SUROWIECKI: Yeah. I think this is really the important point, that, you know, it's not that lifting the debt ceiling suddenly means that we're going to go out and start spending a bunch of money that no one had previously authorized. Really, what the debt ceiling just allows us to do is pay bills that we have already committed to paying. Those include, you know, obvious things like Social Security and Medicare, but really everything else.

I mean, Congress authority authorized all of the spending, and now is basically telling Barack Obama, you know, don't go ahead and do what they told you to do. Having this artificial ceiling really doesn't add anything to the process. It would be fine to have it if there weren't negative costs. But I think what we're seeing now is, you know, the consequences of not raising the debt ceiling would be catastrophic, and that just is - doesn't make any sense, I think, given how little it actually does.

KELLY: Let me play devil's advocate. There are, of course, plenty disagree that failure to raise the debt ceiling would be catastrophic. The other point is many would argue that having sort of ceiling in place fosters accountability -fosters straight talk.

Mr. SUROWIECKI: Yeah. Let's talk about both those things. I mean, the first is I think those who are trying to say that having the United States default on its obligations would not be catastrophic are really either being naive or, alternatively, are just saying it as a bargaining strategy. I mean, there's certainly a lot of brinkmanship going on out there. And making yourself sound as if you're willing to drive the economy off a cliff makes you more effective in that bargaining.

KELLY: And what about the argument that having this ceiling fosters accountability?

Mr. SUROWIECKI: Yeah. So the way I frame it is that I think the problem with the debt ceiling as a kind of accountability device or, you know, a way of sort of binding yourself is, first of all, it's kind of week. Congress has raised the debt ceiling more than 100 times, I think, since it was created in 1917. So, in that sense, it's not very tough.

The other thing, I would say, is that on the flipside, is that it's just too strong. The consequences of not raising the debt ceiling are just too severe, given the sin they're trying to correct.

KELLY: Last question, James Surowiecki, for the moment, the reality is we do have a debt ceiling. The clock is ticking.

(Soundbite of laughter)

KELLY: What do you think the prospects are - Republicans and Democrats - for reaching a deal?

Mr. SUROWIECKI: I have a very hard time believing that when it comes down to it, that we will not reach some sort of agreement. But I think the danger in any kind of situation like this is, well, they're two-fold. I mean, one is that people might just misjudge each other, so the two parties, you know, may just not fully grasp how far the other side is willing to go, or vice versa. And in that case, you could end up with a bad situation.

The other thing which I talk about in my column a little bit, and I think this is one of the things that's really dangerous about the debt - having a debt ceiling at all - is that there's a lot of evidence from studies of how negotiations happen that having time pressure really actually tends to make people less inclined to make good bargains. I think my point is really - it's silly for us to be in this situation. We have so many problems in this economy, that spending our time and energy fighting over one that we've just created for ourselves, it just strikes me utterly absurd.

KELLY: James, thanks very much.

Mr. SUROWIECKI: You're welcome.

KELLY: That New Yorker writer James Surowiecki. His latest column is titled "Smash the Ceiling."

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