Unfortunately in my travels and other obsessions the debt ceiling managed to get repealed without any commentary.
In short – my views are more or less the same as Chris Berg’s views.
The debt ceiling was a rare example of a fiscal rule in Australia, an explicit constraint imposed on the government’s financial power.
The purpose of a debt ceiling is to fight the natural proclivities of government to run persistent deficits. There’s every incentive in politics to spend money but very little to save it. I explained this dynamic in the Drum during the election campaign. Because spending is popular and taxing is not, deficits are the inevitable result.
Yes, the debt ceiling wasn’t much of a ceiling. It didn’t stop government spending more than it earned. Labor raised it twice, and – if the Greens had not pushed for its abolition – the Coalition would have raised it again.
But that’s not the point. A debt ceiling is an assurance that going further into debt has at least some political cost. It helps at the margin.
And in that sense, Australia’s debt ceiling was very effective. From the opposition benches, Joe Hockey and Tony Abbott tore strips off the hapless Wayne Swan when he raised the limit in 2012. It confirmed everything the Coalition had been saying about the irresponsible Labor government. Swan would not have enjoyed asking Parliament for his increase. The debt ceiling helped keep his budget troubles in the news.
A lot of people point out that the debt ceiling only came into existence in 2008 and so we really didn’t need it. Well no. We were very critical of Peter Costello and his tardiness in cutting taxes. But there was never any doubt, no doubt at all, that he didn’t like debt and deficit and that given the opportunity he would have preferred negative net debt and zero gross debt. Wayne Swan needed an external discipline imposed upon him and, I suspect, Joe Hockey does too.