A professor’s take: Why the debt ceiling should be a dead letter

Neil H. Buchanan is a law professor and author of “The Debt Ceiling Disasters: How the Republicans Created an Unnecessary Constitutional Crisis and How the Democrats Can Fight Back”. 

President Barack Obama speaks to the media in 2011 after Congress passed a debt ceiling bill. Lawmakers will battle over the issue again this hear. Photo courtesy of the White House

In my new book, I explain the issues surrounding the debt ceiling that have arisen since early 2011, when the Republicans became the majority party in the U.S. House of Representatives. Today, the nation turns its attention to the debt ceiling once again, as Congress grapples with a crisis of its own making.

These issues are important to everyone, especially young people who are wondering what their post-college lives will look like.  As damaging as a short-term government shutdown would be, the more lasting damage from the current political standoff would come from failing to resolve the debt ceiling issue once and for all, and instead to allow the government to default on its obligations.

What is the different between a shutdown and a default? The federal government’s operations must all be authorized by law, allowing money to be collected and spent to keep airports open, pay for medical care, allow the FBI to continue to fight crime, and allow student loans and grants to be disbursed.

Most government operations are funded on an annual basis, with fiscal years ending on September 30.  If money is not appropriated by October 1, the government will be unable to operate as normal.  Emergency functions are guaranteed to continue, but most everything else would stop until a deal is reached.

That would be deeply harmful to the economy, and financial markets would respond badly.  Still, we have experienced occasional shutdowns before, and we could probably ride out the storm this time, too.  The longer the shutdown, the worse things would be.  Once the shutdown ended, however, the damage could mostly be reversed.

A government default would be different, and much worse. If the federal government were ever to be unable to pay the bills to which it has legally obligated itself, the United States would for the first time in its history have violated its full faith and credit.  Once that promise has been broken, there is no going back.

Not just in the short term, but from now on, the federal government would have to pay extra, to compensate lenders for the extra risk that they would correctly perceive, after seeing our government fail to live up to its obligations to pay in full and on time.

A default is not an economic inevitability. It would only happen if Republicans refused to authorize additional borrowing needed to fund the government operations that they themselves have approved, and if President Barack Obama were then to decide not to pay some of those obligations, rather than borrowing the money necessary to avoid default.

In my book, I explain that when Congress has committed the United States to certain obligations, the president is constitutionally obligated to exceed the debt ceiling, rather than allowing the full faith and credit of our country to be destroyed.

If the president fails to declare the debt ceiling a dead letter this year, moreover, we will face the same threat of default every time Congress decides to replay this dangerous drama.  Young people should hope that the President stops that madness now, for the sake of everyone’s future.

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