Treasury Secretary Timothy Geithner made news last week by proposing to transfer the Congressional prerogative to raise the debt ceiling to the President. The change would essentially do away with the meaningless debt ceiling debates that have become ritual kabuki in Washington over the past few generations. Most Republicans have dismissed the proposal as a blatant executive power grab that will significantly weaken both the Congress and the minority party. While this is certainly true, Congress will only lose a power that it has never shown the slightest courage to actually use. But in truth, the proposal has the merit of...
This article started so well, and then went over a cliff somehow. The US did not always have a balanced budget before it created the Fed. Instead Congress authorized debt as it passed bills. This was considered inefficient and so the Debt Ceiling was created. That is one bill authorizing borrowing for a large number of bills rather than doing it bill by bill. And yes what lenders care about is whether one meets ones obligations, that is whether one pays them as they come due. That is precisely the issue that affects the bond markets. But Schiff is right that Congress controls spending through the bills it passes, and thinking it is the debt ceiling that does it is a mistake.
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