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The US continually increases the debit ceiling whenever it is reached. It has been raised over 30 times in the last 30 years. The debt ceiling as explained by the Government Accountability Office is:

The debt limit does not control or limit the ability of the federal government to run deficits or incur obligations. Rather, it is a limit on the ability to pay obligations already incurred.

Since th US deficit is the difference between expenditures and revenue, and the debi ceiling limits the ability of the US to pay obligations, if the debt ceiling isn't raised, ...

Would it force the federal government to spend no more money than it takes in?

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The best possible answer is maybe, the Treasury spending only what it takes in is likely the least bad and least illegal option.

The president could order the treasury to continue issuing bonds past the debt limit. This would be an impeachable offense. The far greater problem with this is that interest rates on these bonds would likely be significantly higher due to the risk they could be made invalid as they weren't legally issued.

The Treasury could also try other tricks like the trillion dollar coin, but this also isn't a great option and could spike inflation, and you still need to have a buyer of the coin to take the risk of the coin being accepted as currency.

The Treasury could also simply spend what revenue it receives and prioritize accordingly, which is enough to prevent defaulting to our creditors, but would mean other programs would not receive the money promised them or at least not right away, which is still technically illegal. This would also cause major problems, but it would still allow the U.S. to borrow at reasonable rates in the future, where defaulting on the debt would likely destroy the credit worthiness of the state.

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An interesting question, as permanent deficit spending is obviously not a sustainable long-term "third way" compromise between ideological factions.

Considering that the 14th Amendment would take precedence over appropriation bills and suchlike mechanisms in laws enacted by the legislature: Yes, the government would have to prioritise debt repayment over spending initiatives.

However, the market burden of meeting debt repayments doesn't in and of itself prohibit the government from leveraging itself to the hilt with debt it can (one hopes) repay. Which is to say, to stop deficit spending and get a balanced budget, you either need to kill appropriation bills that spend money or create appropriation bills that raise revenue.

The government has fallen into the classic trap that a teenage girl might make of treating credit card debt as new revenue instead of a temporal redistribution of existing revenue, subsidised by interest.

So I'd say: No, it wouldn't force the government away from deficit spending but it should strongly prompt the government to re-evaluate its current debt spiral "solution" for balancing income and expenses.

In a dreadfully volatile way, the current brinkmanship is a symptom of this re-evaluation - and a fundamental cultural consensus that the electorate has to reach.

  • I am not sure I understand this, " No, it wouldn't force the government away from deficit spending." How would the government continue deficit spending without incurring more debt (and going over the debit ceiling)? – user1873 Oct 17 '13 at 0:41
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    You are assuming rational actors with the long-term interests of the country at heart. Breaching a debt ceiling would raise the cost of debt-servicing, but the government can still spend more than it raises by simply issuing lower and lower quality bonds or greenbacks. A microeconomic equivalent would be a gambler that starts with savings, then overdrafts, then credit cards, then pay-day loans, then loan sharks, then organs on the black market or a bullet in the head. All the while they were spending more than they earned by virtue of time-shifting the obligation with progressive interest. – LateralFractal Oct 17 '13 at 1:03
  • @user1873 It is also unclear if Article IV puts a floor on the quality of debt issued, or simply leaves it to the market. Given how unreliable the early issues of government bonds were in the 18th/19th century, I'd say Article IV hasn't put such a restriction on the government, as currently interpreted. – LateralFractal Oct 17 '13 at 1:05
  • I don't know if adding another $7.3 trillion (in 10 years), or $22.8 trillion (in 30 years) would be such a good idea, but good to know +1. – user1873 Oct 17 '13 at 2:16
  • @CGCampbell Technically it was ageist. As for the use of an analogy in an otherwise dry answer, this depends on your familiarity with the influence of social status and its material trappings upon survival and food allocation within paleolithic tribal structures. Or put simply, the sexism is within you. – LateralFractal Jun 24 '17 at 7:48

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