Validity of the public debt

[unixronin]

"The simplest option is the best," says Annie Lowrey, writing in Slate.  "Congress needs only to lift the ceiling—or, better yet, to abolish it—to keep the country solvent and to give it space to move on to tackling the country's real problems."

Tell you what, Ms. Lowrey.  How about you try that with your credit card company — you know, just call them right up and let them know that you're unilaterally eliminating your credit limit — and let us all know how it works out for you.

I can scarcely believe how many supposedly at least moderately intelligent people think that the "validity of the public debt" clause in the 14th Amendment means the government can pile up debt without limit.  What it MEANS is that once it has accumulated a debt, the government is not permitted to simply casually repudiate it and pretend it doesn't exist — say, on the grounds that "but that was a previous administration that spent that money".  Come on, people, it's not even big or obscure words like that pesky "well regulated" bit.  "The validity of the public debt of the United States [...] shall not be questioned."  What does that mean, in the plainest possible terms?

It means this:

The United States may not deny that money which it has borrowed is legally owed, or that it is obligated to repay it.

Nothing more.

Nothing less.

Fiscal responsibility.  No wonder the Left is so confused about it.

Comments

[wcg]

While I agree with you about the 14th amendment, I disagree with your credit card analogy. In setting a debt ceiling congress is not doing anything like what a bank does when it sets a credit card limit. Credit card limits are a lending agency's assessment of how much debt you can afford. The "lending agencies" of the world are quite sure the US is good for far more debt than we currently have, and they'll happily buy up all the treasury bonds that go up for sale later this week once congress approves their sale.

The point of the debt ceiling was supposed to be that congress would make a public statement of sovereign debt obligation for public programs it had enacted. It allowed the Treasury department to know how much to sell in treasury bonds.

There's nothing I can think of in the language of personal finance that compares well with bonds. But if you want some approximation, it would be more like the maximum mortgage you can qualify for rather than a credit card limit. Bonds represent secured debt, just as mortgages do. Credit cards are unsecured debt.

[unixronin]

The credit card analogy isn't intended to be perfect. My point in that regard was rather more that one cannot increase one's means and spending power simply by declaring it to be so. There are different obstacles in the way, it's true; in the consumer credit card, you are not the one who has the say in how much other people are willing to loan to you. Yet that, too, has its parallels in the government case. just as I cannot make more money — personal wealth — available to me simply by declaring that I have the power to spend it, the government cannot make more actual wealth available simply by declaring that it has the power to spend more dollars. That simply decreases the value of all dollars everywhere, and increases the fraction of that total value which is held by the government (at everyone else's expense).