The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. There’s a sentence in the 14th Amendment to the US Constitution that says: During 99% of the time, it is not controversial, and so it has not made its way to the US Supreme Court to be ruled on.
#Sovereign debt defaults full
However, out of practicality, the debt ceiling is also a tool that can be used for this sort of purpose, even though it’s technically only about whether the government will pay previously-authorized spending obligations and honor its debt.įor this reason, although it has been in place for over a century, there is a lack of full legal clarity about whether the debt ceiling is even constitutional.
To promote fiscal constraint, politicians can vote against increases in spending, or propose new legislation that reduces existing ongoing spending obligations. In other words, logically-speaking, the idea of fiscal constraint is relevant when deciding on new spending and taxation plans, but not relevant during debt ceiling disputes, which are about prior spending plans. To not raise the debt ceiling means the government either has to not pay previously-authorized spending obligations, or default on its national debt, which is accumulated over time from previously-authorized spending obligations. Raising the debt ceiling itself doesn’t authorize new spending it merely allows the government to continue paying its previously-authorized spending obligations. The debt ceiling on its own is a separate concept from new spending authorization, although it can be combined into the same piece of legislation. Often, when politicians oppose raising the debt ceiling, they do so within the narrative of fiscal constraint, but that is mostly political theater. Put simply, Congress (the Legislative Branch) stopped micromanaging Treasury bond issuance to fund spending authorizations (thus leaving it as a function of the Executive Branch) but still retained its authority to ensure a division of powers by limiting the total amount of debt issuance, and still has to authorize federal spending.Īccording to data going back to 1960 by the US Treasury, Congress has raised or extended the debt ceiling 78 times, including 29 times under Democratic presidents and 49 times under Republican presidents.Ī handful of times in recent years, most notably in 2011 but a few other times as well, Congress used the debt ceiling in order to pressure a presidential administration to either extract a bargain or for narrative gain. Eventually, beyond a certain scale for fiscal spending during World War I, this practice became administratively unsustainable.įrom 1917 onward, Congress instead would allow the US Treasury Department to issue bonds as it sees fit, albeit constrained by a Congressionally-set debt ceiling. Prior to 1917, Congress authorized individual bond issuance to supplement tax revenue to fulfill specific spending allocations. The Debt Ceiling BackdropĬongress is the political body that authorizes spending by the US federal government. However, I’m writing this article in the more evergreen sense so that it can mostly apply to all future debt ceiling situations as well, rather than just this particular event. This article breaks down some of the nuances involved in this strange situation, which comes up every few years.Īs of this writing, the US Treasury expects to run out of money by mid-October unless the debt ceiling is raised. The US debt ceiling is in the news again due to Congressional gridlock, along with the possibility of a US sovereign default and the unintuitive idea of the US Treasury Department minting a trillion-dollar platinum coin to bypass the problem.
0 kommentar(er)
