As a free market advocate, I don’t think government should have a debt limit. Such a limit is a good example of a non-market-based, government interference that produces bad unintended consequences.
We’re seeing one of those consequences play out now as the debt limit is used by all sides as a political bargaining chip to pick winners and losers.
The debt limit is phony. It has no bearing on reality. It is not tied to the actual fiscal health of government finance. It says nothing about whether lenders would continue lending to the US government or whether the government has ample funds to service its obligations.
It’s just an arbitrary limit, that can be changed. It was set by previous politicians so they could claim to support fiscal responsibility in their campaign speeches. As with many such political actions, they only give rise to political theater down the road.
I don’t believe the government should borrow ad infinitum. I do believe the government should exercise good fiscal discipline. But I believe credit markets are more effective than Congress at regulating borrowing. I also believe voters should be more effective at voting in candidates that will support fiscal responsibility.