We said earlier this month that the #1 thing that lawmakers could do to improve US fiscal prospects is eliminate the debt ceiling.
There are a few simple reasons why:
It's dangerous. If Congress fails to raise it, it could result in a catastrophic financial situation, whereupon the US was forced to default.
By threatening the above, it allows an opposition to hold the nation hostage (this applies to Republicans and Democrats [who also have a history of opposing hikes when they're out of power])
It doesn't accomplish anything. It's never reduced the trajectory of government spending.
The one time it was used to reduce spending (the 2011 standoff) nobody liked the results.
There's only one counterargument:
The debt ceiling provides a nice opportunity to take stock of the nation's finances. It's a good tradition to have in place.
This is why Tim Geithner's new proposal is so brilliant.
As part of the White House's "opening offer" in the Fiscal Cliff negotiations, here's what Geithner proposed, according to The New York Times' Jonathan Weisman:
Nailed it. This almost completely prevents a debt ceiling crisis ever again, while keeping the ceremonial aspect that people like. There would still be votes, but they'll mainly serve as a way to let politicians play politics, without putting anything at risk. For what it's worth, after the 2011 standoff, when Obama wanted to be sure that the debt ceiling hike would get the country through the 2012 election, this was the method used. The ceiling was raised in a few steps, giving the Republicans a few votes to register their displeasure.
It's so reasonable, nobody could possibly disagree.