First, I would vote against raising the debt ceiling because it is one of the few ways to force cuts to the rate of growth in government. In Washington, seldom are "cuts" genuine reductions in spending; cuts are reductions to projected increases in spending. Baseline budgeting is reckless — in households, business, or government. Imagine basing your spending for 2014 based on 2013 + a hoped-for raise. Baseline budgets assume population growth, inflation, increased revenues, and more. The calculations are prone to error.
Consider how easy it is for baselines to go awry. An increase in interest rates leads to higher debt maintenance costs, leads to decreased available revenues. A recession leads to lower tax receipts, and less revenues, while it might also increase demands for some services. You simply cannot predict the thousands of variables involved in federal or state spending.
Having a debt ceiling forces Congress to decide: do we spend more to deal with current circumstances, or do we cut spending to address other fiscal concerns? It is a debate that we should have every six months, anyway.
[The] debt ceiling was supposed to make things easier. A hundred years ago, it seemed so straightforward.
When Congress wanted to spend, it spent. And if it needed to borrow, it approved the sale of a bunch of Treasury bonds. Congress would consider each new bond individually.
"They would literally approve the form of the security, the purpose of the security, what the duration was going to be, what the interest rate was going to be," says Susan Irving from the Government Accountability Office.
But with the start of World War I, that process became way too time consuming.
"If you think about the number of decisions that go on during a war," Irving says, "you're coming in constantly. 'Oh, now we need to borrow up to so much to build more tanks' "
So Congress delegated the details of bond sales to the Treasury Department.
But Don Ritchie, the official historian of the Senate, says Congress was wary about giving too much power over to the Treasury.
"They knew they had to do it, there was an urgency to it," Ritchie says. "But one way to control it was to say, 'You have a cap, you just can't go beyond that limit."
So in 1917, Congress came up with the first real debt limit. They wanted to make their lives easier, but not give up too much control. Sort of like putting a leash on a toddler.But, my second point is also important: the formal "Debt Ceiling" is stupid law. If the House and Senate decide to spend money, then they are implicitly agreeing to any deficits and increases to the total debt caused by that spending. If Congress approves disaster spending, they are agreeing to any deficit that results. Whatever Congress spends, legislators must understand that you need to pay the bills eventually.
— NPR Money: History of the Debt Ceiling
The flip-side is that the debt ceiling debates allow a current Congress to undo spending of previous Congresses. Without mandated semi-annual spending revisions, the debt ceiling becomes the rare opportunity to undo past mistakes.
Still, it is bad law. The United States is Constitutionally mandated to pay its bills. The only way to have a legally acceptable debt ceiling, therefore, is to pay all debts by cutting programs dramatically.
Here is an interesting perspective on the debt ceiling:
Debt-Ceiling Gimmickry Is Unbecoming A Rational GovernmentWhat would happen if Congress fails to raise the debt ceiling? The government would have to decide what is and is not a legally mandated debt payment, as part of the "full faith and credit" of the United States. Non-essential services would cease, while bond payments would continue. Still, bond prices would collapse, interest rates would soar, and future debt payments would therefore spiral dramatically — compounding the debt problem.
Richard M. Salsman
January 17, 2013
[Since] the U.S. debt ceiling was adopted in 1916, Democrats have controlled Congress two-thirds of the time, and federal spending has averaged of 19% of GDP (while deficits averaged 3.7% of GDP); in contrast, Republicans have controlled Congress one-third of the time, and spending has averaged 14% of GDP (while deficits have averaged 1.3% of GDP). Generally, Democrats have been more fiscally reckless. Yet history also reveals that each party, whenever it has controlled Congress while facing the rival party in the White House, has resisted raising the debt ceiling and has used it as a political bargaining chip. This tactic brazenly assaults the "full faith and credit" of the U.S., yet another widely-ignored provision of the U.S. Constitution (Article IV, Section 1).
— from Forbes.com