Democracy at the Limit: Does the U.S. Debt Ceiling Really Enhance Fiscal Accountability?

Abstract

ABSTRACT Congressional control of the U.S. debt ceiling continues to prompt uncertainty among financial markets. Nevertheless, the standard defense of a statutory debt limit invokes the idea of accountability: oversight of the national debt by democratically elected policymakers precludes fiscal profligacy. For this argument to hold water, however, one should observe that lawmakers are indeed motivated and held accountable by voters on the debt ceiling. Do policymakers' positions toward the debt ceiling reflect the preferences of their constituents? And are policymakers punished or rewarded for their stances? Analyzing roll call votes on the debt ceiling in the U.S. House of Representatives from 1983 to 2014, I show that lawmakers' positions are driven predominantly by policymaker ideology and bank campaign contributions rather than the demographics or ideological makeup of their constituencies. Furthermore, I find no evidence that Republicans nor lawmakers from conservative-leaning districts are punished by their constituents when voting to raise the debt limit. Democratic lawmakers' reelection chances are affected by their voting behavior but in the form of rewards for approving debt ceiling increases. These findings suggest the U.S. debt ceiling – in addition to posing a high financial risk – contributes little to fiscal accountability.