For those who are hyperventilating about the apparent determination of the Republican Party to throw the economic situation of our nation (and the world) into major turmoil, the New York Intelligencer has some really good news.
In mentioning potential economic "turmoil," of course, I am referring to the possibility that the Congress will refuse to raise the nation's current "debt limit," and that, in consequence, the United States government will have to state, as of June 1st, or thereabouts, that the government is unable to pay its debts. This is the prospect that has been promised by the inspired leadership [?] of The Speaker of the House of Representatives, Kevin McCarthy, who is pictured above.
Individuals and companies that can't pay their obligations are called
"bankrupt." Lots of people, worldwide (not to mention everyone living in
the United States of America), believe that the United States government will, in
fact, pay for goods and services already received. A failure to "raise
the debt limit," generally thought to prevent the government from paying
its bills, will be a statement by the legislative branch of government
that the United States has no such intention. The effects of such a
statement is predicted to have massively negative economic effects, around the world.
The Intelligencer's "good news," which is found in an article linked right here, is that all of the problems that would eventuate, if the United States government refused to pay what it owes for goods and services already received, can be easily avoided by "One Weird Trick."
I assumed, when I read its headline about that "One Weird Trick" solution, that The Intelligencer was going to describe the possibility of minting a single, one trillion dollar platinum coin as a foolproof way to avoid the problems otherwise expected. That would definitely be a "Weird Trick."
Alternatively, I thought that The Intelligencer story might describe how a simple declaration by the President could eliminate all the potential turmoil (both now and into the future).
For those not following this "debt limit" story closely, it appears that the Fourteenth Amendment to the Constitution has actually prohibited the idea that the Congress can pass a bill imposing a "debt limit." If the President said that, and told the Treasury to ignore the Congressional debt limit legislation, that would be "Weird Trick" #2.
Using Weird Trick #2, by the way, would have what some members of the Democratic Party might think of as a political advantage. Such an action by the President would put the question squarely before the United States Supreme Court. The Court would either have to back up the President or take full responsibility for crashing the national and world economy.
As it turns out, The Intelligencer had a Weird Trick #3 in mind. According to the story, the government can borrow money using "consol bonds," as explained here. A short excerpt is below:
Consols are bonds that pay interest but have no set maturity date, so the principal is never repaid. In effect, they are perpetual annuities. In the 18th century, the British began issuing gilts, or bonds, that could be redeemed by the government but did not need to be. When various types of bonds were later consolidated, they were dubbed consols. They are still traded in London capital markets and remain a small part of the British government’s portfolio.
Consols issued by the U.S. Treasury would not fall within the scope of the debt ceiling because there is no principal that is an obligation of the U.S. Treasury. If no principal ever comes due, there is no addition to the U.S. debt as defined by the debt-limit legislation.
I tend to be of the "whatever works" group, as various responses to Speaker McCarthy and the Republicans in the House are discussed. It is worth noting, though, what Wikipedia has to say about "One Weird Trick" solutions. In general, that "One Weird Trick" terminology has been used in online advertising scams, and let's not start treating our politics that way!
The simple solution to the problem is to eliminate any "debt limit" legislation, starting now and going forward. That is how most of the major economies in the world do it. It is presumed (naturally) that if a nation borrows money, it is going to pay it back. The fight should be over whether the expenditure should be made, and whether it makes sense to pay for important activities by borrowing, as opposed to "taxing," as the way that necessary revenue is raised.
Would that be too straightforward?
So it would appear. Put me down for "No Weird Tricks" when it comes to governmental decisions about anything, definitely including our budget process!
Image Credit:
https://nymag.com/intelligencer/2023/05/biden-can-win-the-debt-ceiling-fight-with-consol-bonds.html
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