When President Joe Biden meets with top Republican lawmakers at the White House on Tuesday, they will discuss a problem that exists in no other country on Earth: how to avoid the looming debt ceiling crisis.
That’s according to research from the nonpartisan think tank Atlantic Council. Their research found while several other countries have laws limiting how much money their governments can borrow, nowhere else is it used to play a game of chicken with the health of the economy at stake.
Showdowns over the debt ceiling, like college football and Girl Scout cookies, are a uniquely American phenomenon.
In the U.S., Congress decides how the government spends money and sets a limit on the amount of money the Treasury can borrow to pay those bills. The $31.4-trillion debt limit was exceeded this January, and the government may run out of money as soon as June 1, Treasury Secretary Janet Yellen warned last week.
Lawmakers have just weeks to raise or suspend the limit at the risk of a potential economic crisis if they fail.
“It's a little bit like if I spent money using my credit card, but then when the bill comes due, I say, ‘well I don't authorize myself to pay for the money that I've already spent,’” Michael Klein, a professor of economics at Tufts University, said earlier this month on the EconoFact podcast he hosts.
Debt limits, in the few other countries they exist, are treated far differently, Atlantic Council research shows.
For example, in Denmark, the debt ceiling is so much higher than the actual national debt that it is effectively just a formality. The European Union has a rule on the books to sanction countries that rack up national debt more than 60% of their GDP, but that comes with an escape clause for times of economic distress. The EU debt limit was suspended during the pandemic and may never return.
“Debt limits are self-imposed tools to facilitate sound fiscal policy,” Mrugank Bhusari, an assistant director at the Atlantic Council’s GeoEconomics Center wrote in a blog post in March. “But in practice they serve as orienting goals or tools of political bargaining at best, and triggers of economic chaos at worst. It is unsurprising that most of the world chooses to have no such limit.”