Economist: Congress should have eliminated the debt limit a long time ago. Here’s what you should do now
Since political optics will prevent lawmakers from getting rid of the debt limit, which they should have done decades ago, they should instead neutralize it by getting rid of the debt limit. The stalemate of the Senate So. Congress still has to vote on the debt limit, but passing it wouldn’t be such a heavy lifting.
The limit of debt It is an outdated law that has been around for more than a century. It sets the legal maximum for a state’s debt, and once the maximum is reached, the government can only spend what it gets in revenue. And if the government runs a budget deficit, as it always has, someone won’t get paid, at least not on time. This person could be a soldier, Social Security recipient, global investor who has loaned money to the government, or a long list of others who receive US Treasury checks. Not being able to pay its bills on time means the government will default on payments.
The goal of the debt limit was to force lawmakers to take on fiscal responsibility. The belief was that if they maxed out and faced a default, that would put pressure on them to raise taxes or restrict government spending. This is not how it worked. Instead, often after much drama, lawmakers raise the limit at just the right time to avoid default but without making hard choices about taxes or spending.
The drama will intensify with each fight to reduce debt. In the past, no matter which party was in power, at least some Democrats and Republicans would eventually come to an agreement on a way out. After all, the debt was the result of tax and spending decisions made by both parties long ago. However, in this last battle, Senate Republicans They made it clear that they would not introduce any votes to increase or suspend the debt limit, and would in effect thwart any attempt by Democrats to do so. Democrats will have to increase the limit on their own.
This sets an ugly precedent for future debt limit battles: the ruling party will have to resolve debt limits without the other side’s help. Given the degree of greater political difficulty that entails, it increases the risk that lawmakers won’t get it done before the government defaults, or forces them to take strange steps with other dire consequences to avoid default.
Most of these hairs are Platinum Coin Worth $1 Trillion. The treasury, which has the legal authority to issue platinum coins from any category, would issue such a coin, deposit it in the Federal Reserve, and use its value to pay the bills. there he is! The debt limit does not matter.
Not so fast. Not only does the platinum coin blast the constitutional separation of powers between Congress, which wields portfolio power, and the executive branch, but global investors are sure to freak out over such a ploy. They will rightly imagine that the US government is so dysfunctional that its action will lead to hyperinflation, undermining the value of their bonds. Financial markets will go into turmoil.
Then there is a proposal to summon President Biden to Fourteenth Amendment of the United States Constitution, which protects the “validity of Public debt of the United States.” This amendment was instituted after the Civil War and was intended to ensure that the debts of the united nation that won the war would be paid and that the debts of the Confederacy would not be paid. Modification He sought to prevent any future Congress formerly dominated by Confederate states from refusing to pay federal debts or to guarantee Confederate debts. But why wouldn’t Biden use the amendment to require the Treasury to keep borrowing beyond the debt limit? He can definitely try. Other bosses, including Bill Clinton and Barack ObamaShe thought about it publicly during her debt crises. But it will almost certainly be challenged in the courts, and a constitutional crisis is likely. How do you think global investors will view this? I guess he’s not feeling well.
Another possible way forward is through budget adjustment process, which is what Republicans The Democrats wanted to do it. The process will allow Democrats to raise the bar debt ceiling Without the Republican votes, but it takes a long time and the rules are complicated. Given the complex process and even more complex policies involved, lawmakers may simply not be able to get it done. And future members of Congress may have a more difficult time using reconciliation.
That leaves us with the most logical and least painful way to address the debt limit: an exception to the Senate’s debt limit stall rule. That is, when it comes to increasing the debt limit, the Senate can end the stalling and pass the legislation by a simple majority, instead of the 60 votes required under current rules. Given that the debt limit is so counterproductive that threatening to breach it leads to economic damage, lawmakers should lower the political barrier necessary to significantly increase it.
Paying the US government what it owes in a timely manner is the bedrock of the US economy and the global financial system. It paved the way for the US dollar to eventually become the reserve currency of the global economy. The economic benefits of this over generations are immeasurable. Lawmakers must put an end to the debt limit debate so that future generations can enjoy the same benefits.