Politics, Economics, and the Debt Ceiling

Adam Jones () and Cameron Visser ()
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Adam Jones: University of North Carolina Wilmington
Cameron Visser: University of North Carolina Wilmington

Economics Bulletin, 2014, vol. 34, issue 2, 1222-1228

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.

Keywords: Debt Limit; Recession; Political Minority (search for similar items in EconPapers)
JEL-codes: H3 H6 (search for similar items in EconPapers)
Date: 2014-06-18
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