8 min read

Do other countries have debt ceilings?

Is the U.S. the only country with a debt ceiling? Or are other nations going through this strange fiscal ritual too?
Do other countries have debt ceilings?

Good morning! It’s Tuesday, January 31, 2023. The 2024 elections are 644 days away.

Today I want to once again return to everyone’s favorite topic — the debt ceiling — by tackling a sharp reader question I received: do other countries do this, too?

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Ask Gabe: Are we the only ones with a debt ceiling?

Allison O. asks: “I am left scratching my head at one aspect of this every time it happens: Isn’t Congress where they submit and pass the various bills that require funding in the first place? Debt ceiling discussions happen when they have passed spending bills that surpass it, so why do they then make such a fuss about allowing the spending they have approved to go through?”
Craig C. asks: “Do any other countries have debt ceilings? Seems like taking on the obligation to buy something without knowing if you can pay for it.”

I appreciate these two questions because they help capture some of the absurdities that really are at the heart of the debt ceiling debate.

Just as both Allison and Craig suggested, for all the talk of fiscal responsibility, raising the debt ceiling does not authorize a single cent of new government spending: it simply ensures that the U.S. has the money to pay for things it has already committed to. In that way, the system absolutely allows for the government “taking on the obligation to buy something without knowing if you can pay for it” down the line, as Craig put it.

And, as Allison noted, the same people who told the government to take on such spending — Congress — are now the ones wrestling with whether they should allow the government to pay for it, adding another layer of silliness.

So, do other countries go through this Kabuki dance? Or is the debt ceiling a uniquely American invention, like McDonald’s or the Electoral College?

Actually, many other countries set ceilings on the amount of debt they can incur, although they generally shy away from imposing a hard limit. Instead, most other countries simply have a debt ceiling that is tied to a percentage of their national GDP, which ensures that the limit raises as the country’s wealth does.

For example, all countries in the European Union at least nominally agree to keep their public debt below 60% of their GDP and their annual deficit below 3%; most countries in West Africa agree to keep their debt below 70% of GDP. But in both cases, the limits are treated more as guidelines than hard-and-fast rules, and the ceilings don’t come with risk of default if exceeded.

(For comparison, U.S. debt is currently about 137% of U.S. GDP, so our debt levels are well above those other countries’ targets.)

Only one other country sets a fixed debt limit like the U.S. does: Denmark. But once again, this is the exception that proves the rule. “There’s a crucial difference, however, between our debt limit and Denmark’s,” Chad Stone, the chief economist at the Center on Budget and Policy Priorities, wrote in 2013. “The Danes do not play politics with theirs.”

The chamber where the Danish parliament meets. (Cristoffer Regild)

Denmark’s debt limit was created in 1993 and set at 950 billion Danish kroner (or about $247 billion in today’s U.S. dollars), a ceiling so high above their normal debt intake that there was little fear of hitting it any time soon. The only time the country approached the limit, in 2010 after the 2008 financial crisis, Denmark’s parliament immediately decided to raise it, to 2 trillion Danish kroner (about $364 billion today).

Again, that was far above the level of debt the Danes anticipated incurring in the near future. Instead, the ceiling merely exists as an emergency measure to prevent a future government from ordering truly out-of-this-world spending.

“The explicit intent of [the 2010] move — supported incidentally by all the major parties in the Danish parliament — was to ensure that the Danish debt ceiling remained far in excess of outstanding debt and would never play a role in day-to-day politics,” Jacob Funk Kirkegaard, a fellow at the Peterson Institute for International Economics, wrote in 2011.

The U.S., then, is not the only country with a debt ceiling — but we are the only country with a fixed ceiling that we constantly put ourselves in danger of hitting.

Interestingly, there has been some discussion lately of adopting a debt ceiling more in line with the EU model: per Bloomberg, Reps. Brian Fitzpatrick (R-PA) and Josh Gottheimer (D-NJ) are working on a proposal that would eliminate the fixed debt ceiling and replace it with a limit set as a percentage of GDP.

However, the chances of such a proposal being implemented are probably slim. The U.S. is instead more likely to continue its familiar cycle: approaching the debt ceiling, hitting it, raising it ever so slightly, repeat.

Some lawmakers have also poured cold water on the debt-to-GDP ratio idea: Sen. Kevin Cramer (R-ND), for example, noted that the proposal could raise issues in an economic downturn, when GDP suddenly contracts.

Perhaps that is why most other countries — save our friends in Copenhagen, who have other workarounds — view the debt ceiling as a target to aspire to, rather than a limit with harsh consequences.

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What the government is doing today.

All times Eastern.

Executive Branch

President Biden will travel to New York City today for another trip promoting a project funded by the 2021 bipartisan infrastructure package. Today’s focus will be the Hudson Tunnel Project, which will construct a new underwater rail tunnel beneath the Hudson River and rehabilitate a 113-year-old tunnel currently there.

The White House says the construction — part of the long-sought Gateway Program — will create 72,000 new jobs and improve reliability for the roughly 200,000 passengers who travel the current tunnel on Amtrak or New Jersey Transit trains each weekday.

Biden will also attend a Democratic National Committee fundraiser before returning to Washington. [Watch the infrastructure speech at 12:30 p.m.]

Vice President Harris will ceremonially swear in Jessica Davis Ba, a career diplomat who previously served as her top Africa adviser, as the U.S. Ambassador to Côte d’Ivoire.

She will also award the Congressional Space Medal of Honor — the highest award for American astronauts — to Bob Behnken and Doug Hurley, who completed the first-ever commercial orbital spaceflight as part of a 2020 partnership between NASA and SpaceX. It will be the first time the medal has been awarded since 2006. [Watch the award ceremony at 4:25 p.m.]

Astronauts Bob Behnken (right) and Doug Hurley will receive an award today. (James Blair / NASA)

The White House press briefing will take the form of a gaggle aboard Air Force One, led by principal deputy press secretary Olivia Dalton and White House infrastructure adviser Mitch Landrieu. [Listen at 10:50 a.m.]

Second Gentleman Doug Emhoff is in Berlin, Germany. He will participate in an interfaith roundtable with Jewish, Muslim, and Christian leaders, meet Ukrainian refugees at a local synagogue, and meet with Holocaust survivors at the city’s Holocaust Memorial. Emhoff will then depart Berlin and return to Washington, D.C.

Legislative Branch

The Senate will meet but no roll call votes are expected. The chamber is still not fully organized for the new Congress, as committee assignments have not been formalized. [Watch today’s Senate session at 10 a.m.]

The House will vote on two pieces of legislation:

[Watch today’s House session at 12 p.m.]

Judicial Branch

The Supreme Court has no oral arguments scheduled until mid-February.

Before I go...

Here’s something fun: Not only did Bob Behnken and Doug Hurley — the two astronauts receiving an award from Vice President Harris today — fly a historic mission together, but they’re also best friends.

They’ve blazed strikingly similar paths through life (and space): both were former military pilots who achieved the rank of colonel in their respective services before joining NASA in 2000 and flying two space shuttle missions. Plus, they’re both married to fellow astronauts from their 17-person NASA class of 2000.

“In addition to finishing each other’s sentences, we can predict, you know, almost by body language, what the person’s opinion is or what they’re going to do, what their next action is going to be,” Behnken said of their relationship.

“Being lucky enough to get to fly with your best friend is kind of a — I think there’s a lot of people that wish they could do that, and we’re lucky enough to do it,” Hurley (whose call sign is “Chunky”) said in a 2020 video by NASA video. Today, they will receive the highest honor awarded to U.S. astronauts.

Sounds like the makings of a great buddy comedy. Here’s more on their friendship.

👍 Thanks for reading.

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— Gabe