Can Borrowing From Abroad Avoid The Debt Ceiling?
Barkley Rosser at Econospeak points us to a portion of the nature of debt and borrowing, federal debt, and financing:
Can Borrowing From Abroad Avoid The Debt Ceiling?
No, but Allan Sloan in the Washington Post today thinks it can, or maybe it can. He proposes that Treasury borrow $200 billion in US government securities from China to use to continue to pay bills if we hit the ceiling, thereby supposedly overcoming dumb gridlocks that should not be happening and have led to such stupidities as the current “fiscal cliff.” Sloan modestly calls this the “Sloan Strategem” (Ahem, rule against people naming things for themselves holds here, ahem!)
But the answer is no. Treasury already has a bunch of delaying mechanisms that hold off the moment of truth for several weeks. We saw that in 2011, when we breezed past technical bankruptcy in June only to fact it in early Augusst when the fiscal cliff got cooked up. This device would only add some other arbitrary amount of time that would simply delay the moment of blackmail reckoning.
The answer is to abolish the debt ceiling. People ranging from Bill Clinton through Bruce Bartlett to me and a lot of others have argued that the debt ceiling is unconstitutional on multiple grounds, quite aside from being bizarre and self-contradictory, actually incoherent. Obama should bite the bullet when it next comes really due, and declare it unconstitutional. I bet the markets will go up if he does so, although there will of course be a Supreme Court case on the matter. But better to fight that fight than to be set up to constantly have to deal with these blackmail threats that the House Tea Partiers have made it clear they will continue to impose repeatedly, no matter what comes out of the current fiscal cliff negotiations, which may well be things that voters most definitely did not vote for in this recent election and should not be put into place.
Given that there is no language about a debt ceiling in the Constitution, you would think that the strict constitutionalist conservative tea partiers would be opposed to such an idea. Looks like another case of the ends justifying the means.
If you authorize specific spending and specific taxes with a pretty good idea of an expected surplus or deficit, the deficit is already authorized. A debt ceiling is superfluous and implicitly contradictory, a way for Congress or the President to be spend thrifts or tax thrifts and appear fiscally prudent at one and the same time.
“Obama should bite the bullet when it next comes really due, and declare it unconstitutional.”
Sure would like to see this Obama show up. I think the Fox head explosion would be even more colorful than what we just saw.
The debt ceiling rule is just plain silly.
Comment via Warren Mosler:
The national debt is nothing more than dollar balances in ‘securities accounts’ at the Fed.
It gets ‘paid back’ at maturity by shifting the dollars balances from the securities accounts to reserve accounts, also at the Fed. There are no grandchildren or taxpayers in sight when this happens every month. Get over it!!!
http://www.huffingtonpost.com/warren-mosler/fiscal-cliff-debt_b_2114140.html#postComment
Just mint the five trillion dollar platinum coin, with St Reagan on the front and the constitutional line about paying our debts on the back. Proceed to watch Republican heads explode.