(Article originally published here on October 26, 2015)
U.S. Notes have been issued in many forms since 1862 until 1972, remaining in official circulation until 1996.
(Image by Wikipedia (commons.wikimedia.org), Author: The Bureau of Engraving and Printing National Museum of American History ) Details Source DMCA
Here we go yet again, with a new threat to default on the debt a previous Congress already authorized to be paid. A lot of words have been expended on the issue of the debt ceiling, including versions of this article published 3 times previously (see below).
Yesterday, I wrote the following comment in response to a New York Times article:
There is a 4th option (in addition to the 3 mentioned in the article) to bypass the debt ceiling. Reissue debt-free United States Notes. The first big issuance was $450m in 1862-1863 to pay for the Civil War. That almost doubled the federal budget but it was necessary when the NY banks wanted 24-36% interest on loans to the government (that's what a low credit rating + anti-American British interests can do). U.S. Notes are to this day, specifically excluded in the quarterly U.S. debt report. They are not debt so they can be issued any time, in any amount, for any reason under the Constitution's Art. 1, Sec. 8 Coinage Clause.
Short of that, this "deal" includes a penalty provision to cut spending during the remainder of Biden's term if any of the 12 separate spending bills is not agreed upon, according to reporting in the NY Times. Who wants to place money, or American credit-worthiness, on whether Republicans will agree on any of these upcoming bills over the next 2 years? That 2-year window won't seem so generous when government shutdowns over spending bills loom in the next few months. Of course, once Democrats are out of the presidency in 2024, the Republican president will do what they've all done in the past, spend lavishly, running up the debt again, just like the 70% of the debt they've already run up.
Nothing has changed from my original article below except the extremism of the economic hostage-takers on the Right and, perhaps encouragingly, the acceptance of potential alternatives to succumbing to their demands, by the Left. However, president Biden is an institutionalist and he hasn't accepted any of these options.
I fear House majority leader McCarthy is going to postpone his extortionate demands during the debt ceiling crisis, only to invoke government shutdowns later, when individual spending bills must be passed.
The following article was originally published in 2013, then again in 2015 with modifications, when the debt ceiling was within a few weeks of being broached.
As president Reagan used to say "There you go again." We are here (again) at another self-imposed debt-ceiling, reachable in a few weeks according to Treasury Secretary Janet Yellen, and possibly even the end of this week due to a debt ceiling moratorium that is due to expire then.
All the arguments below are still valid, though the bills proposed at the time may have been tabled.
The president can, and Constitutionally must, pay bills already authorized by Congress. There is precedent for Treasury-issued money from president Lincoln's time to fight the Civil War. And the faith in the dollar must not be sacrificed to partisan gamesmanship.
See details below.
(Article originally published here on October 18, 2013)
United States Note by Wikipedia Commons
The article below was originally published when the last debt ceiling had just passed in October, 2013, after being published during the previous debt ceiling of January 2013.
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