Moody’s Investor Service has once again warned the United States government that it might lose its AAA bond rating if it can no longer meet its obligations to creditors, which will happen soon if lawmakers fail to raise the statutory debt limit by August 2. In issuing that admonition, Moody’s has also proposed a novel solution, of sorts, to the current impasse over the debt ceiling: Just get rid of it.
Constitutionally, only Congress can approve the issuance of debt to fund government spending. When it was passed by Congress in 1917, the statutory debt limit was designed to give the administration some flexibility, by allowing Congress to approve the issuance of debt in bulk, up to a certain amount. Now, every time the administration inches closer to that amount, Congress has to raise the limit so the government can keep borrowing money to pay for its spending.
That system, according to a report issued by Moody’s analyst Steven Hess, has created “periodic uncertainty” over whether the U.S. can continue to meet its obligations to creditors, Reuters reported Monday. “We would reduce our assessment of event risk if the government changed its framework for managing government debt to lessen or eliminate that uncertainty,” Hess wrote.