It seems like practically every day something comes up that I just don’t understand. With all of the hand-wringing that’s been going on over the next reaching of the debt limit, it occurred to me that I really didn’t understand much of the discussion. You don’t need to look very hard to find an op-ed, editorial, blog post, or even a pronouncement by a high-ranking government official that the debt limit can just be ignored.
Here’s what puzzles me. Why isn’t the converse equally true or even truer? That is, that in appropriating spending beyond the debt limit Congress is exceeding its authority and the appropriation is illegitimate and should just be ignored.
It seems to me that’s actually the better argument. The 14th amendment guarantees the debt not appropriations. An appropriation is just a federal law. The Congress can reduce the appropriation or eliminate it altogether just by passing another law. The debt on the other hand is beyond the power of Congress to abrogate or reduce other than by appropriations to do so.
I know that there are people who believe that the federal government as a monetary sovereign does not have debts. They’re confused. The Treasury issues bonds and bonds are by definition debt instruments. It would be more accurate to say that the federal government as a monetary sovereign does not require debt to finance its operations. I have my doubts about even this since I wonder to what degree the federal government is actually a monetary sovereign. The federal government and the Federal Reserve are not synonymous and the Federal Reserve is a public/private hybrid, not a government department.
The Treasury can certainly always print more money. However, it can’t force the Federal Reserve to honor its checks. To me that implies limits to the federal government’s monetary sovereignty. But back to the original question.
So, help me out here. Why is the debt limit redundant?