Government debt limits have nothing to do with protecting future generations from paying back our loans.
The century-old legal justification for spending limits turns out to be an economic myth. These rules do not prevent inter-generational conflict or save money for the children of the future. Their only actual function is to make sure that different municipalities have equal access to credit markets. We assume that debt caps are a form of fiscal responsibility that keeps our kids' future bright. Instead, they are just a tool for managing the competition between different cities trying to borrow money at the same time.
Debt Limits' End
SSRN · 6726261
Debt is a major tool funding American local governments. Local governments are, however, severely constrained in their ability to rely on this vital tool. For over a century now, state constitutions and statutes have strictly curbed local governments’ power to issue debt. The effectiveness of these legal restrictions has often been questioned, but the rationale for their existence has not been doubted. This Article presents the first systematic appraisal of the justifications offered for the lim