'People who get a kick out of watching children at play must love the spectacle staged in Washington every time the issue of the federal debt ceiling comes up,' writes columnist hiltzikm.
Every couple of years, with a regularity you can almost set your watch by, Congress flirts with the threat of not raising the federal debt ceiling and toying with a federal default.
Let’s be clear that the consequences of breaching the debt ceiling would be dire. If the government defaults on its bonds by missing a payment, its cost of borrowing would instantly rise, placing a further burden on the budget and cratering the value of Treasury securities held by individuals, pension funds and sovereign nations. The safe-haven stature of T-bonds and the dollar would be deeply impaired.
Before we get into the substance of the current discussions, which involve House Speaker Nancy Pelosi and Treasury Secretary Steven T. Mnuchin, let’s canter through the historical background of this stupid government rule.freedom to issue debt, not less. That was in 1917. At that time, Congress was required to vote on every bond issue, which the members rightly considered a pain in the rear.
This was always mere posturing. Spending decisions are made by Congress, almost always without regard to the debt ceiling, which comes into play later, when the Treasury is tasked with finding the money for congressional mandates. The Government Accountability Office delivered a reality dose about this as bluntly as possible in: “The debt limit does not control or limit the ability of the federal government to run deficits or incur obligations,” the agency wrote.
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