Last month, the US passed through a politically created fiscal crisis; commentators were suggesting that for the third time Congress would cause the Federal Government to run out of cash and default on bond and salary payments, and 3rd party bills for goods and services. This is a tactic pursued by those who don’t like government expenditure unless its on arms.
Politically and institutionally, it is caused by the fact that Congress votes separately on appropriations and the debt, but the change in the national debt in a given year is caused by expenditure and taxation decisions.
ΔDy = Gy – Ty
This is axiomatic. It is not subject to the application of opinion or belief. Taking these decisions separately will always cause a budget crisis.
Yet again this time the Federal Executive did a deal with the House of Representatives, but there were three ways that the Government could have sidestepped this piece of legislative extortion.
There are some who argue that the 14th amendment makes default unconstitutional and thus that debt ceiling laws should be set aside as unconstitutional.
I prefer the argument that the legal decisions on tax and spend were also set by Congress and that the President has a choice of which law to break where they are in mathematical conflict. This would have the huge advantage of putting the onus on the Republicans to go to the Supreme Court.
The third, I find hugely amusing, which is to instruct the US Mint to create a $1Tn coin. It seems that the legislation regulating the management of the Mint, means that any surplus funds held by the Mint are accounted as a federal government consolidated fund asset. (I suppose it’s a form of quantitative easing, without the benefits of allowing anyone to spend it, although it’s being made to cover expenditure so that is the effective increase in demand.)
Progressives should be wary, this idea of legislating, or embedding fiscal policy in treaties or constitutions is designed by people who support the founding fathers, who while they opposed taxation without representation, were almost equally opposed to taxation with representation. NB The EU’s stability and growth treaty commits its signatories to a level of national debt and a level of national deficit. They need to change this.
The image of the coin is posted by donkeyhotey at flickr. CC 2013 BY