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Politics, Economics, and the Debt Ceiling

Author

Listed:
  • Adam Talbot Jones

    (University of North Carolina Wilmington)

  • Cameron Visser

    (University of North Carolina Wilmington)

Abstract

Since the early 20th century, the Federal Government has chosen a self-imposed statutory limit on federal debt which has been increased, and occasionally reduced, in sporadic intervals. This paper uses a regression model to examine the time interval between changes in the statutory debt limit and whether the date of the next increase is pushed beyond the next national election. Results show the length of the extension and the likelihood that the ceiling limit lasts beyond the next election is significantly higher under when Republicans have enough seats in congress to exert some influence over policy. However, both the time an increase lasts and the likelihood an increase lasts beyond the next election are reduced when Republicans have a sufficient number of seats to exert influence and the economy is in a recession. This suggests that incumbents in both parties are inclined to push a controversial debt limit vote beyond elections if possible unless Republicans believe they can make political points during a recession.

Suggested Citation

  • Adam Talbot Jones & Cameron Visser, 2014. "Politics, Economics, and the Debt Ceiling," Economics Bulletin, AccessEcon, vol. 34(2), pages 1222-1228.
  • Handle: RePEc:ebl:ecbull:eb-14-00462
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    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "Growth in a Time of Debt," American Economic Review, American Economic Association, vol. 100(2), pages 573-578, May.
    2. Reinhart, Carmen & Rogoff, Kenneth, 2010. "Debt and Growth Revisited," MPRA Paper 24376, University Library of Munich, Germany.
    3. Joonkyung Ha & Jong-Wha Lee & Lea Sumulong, 2010. "Rebalancing Growth in the Republic of Korea," Macroeconomics Working Papers 22753, East Asian Bureau of Economic Research.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Debt Limit; Recession; Political Minority;
    All these keywords.

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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