Does the Debt Ceiling Have to Be Raised?

By Joe Firestone

Lately, the word out of Washington, DC from the plugged in people is that there will be no debt ceiling crisis coming up before the election. Politico says so, and so does the National Journal. MSNBC also agrees.
But not so fast, says the Washington Post, echoing the Wall Street Journal provided the House Republicans can agree on “. . . an extortion demand.” If they can, then we wll have another debt ceiling crisis.

Here’s a statement from Dave Johnson at the Center for the American Future (CAF) characterizing the possible crisis from a “progressive” point of view.

“Republicans voted for a budget that caved in to many of their economy-sabotaging, hostage-ransom austerity demands. Now the “debt ceiling” has to be raised in February so the government can pay for that budget that Republicans voted for. Republicans are saying no way without a new ransom. Or they’ll blow up the economy. Even hinting at this is economic sabotage.

This is a false statement. The false part of it is the flat unqualified claim that the debt limit must “. . . be raised in February so the Government can pay for that budget the Republicans voted for.”

By now it’s common knowledge that this series and one or more of these options are proposed in many other places and have been discussed for a few years now. There’s no excuse for Dave Johnson not to know about these alternatives. Yet he’s characterizing the crisis falsely, unless we think he can show that none of these other options can work, and certainly he didn’t even attempt to do that in his post, and has never considered them anywhere else.

Johnson goes on:

Treasury Secretary Jack Lew has announced that Congress must increase the debt ceiling by late February. Extreme measures that the Treasury takes to put off the need to sell some bonds to pay bills (authorized by Congress) will be used up and the country will no longer be able to honor its obligations.”

And this is another, at least misleading, statement, since there are other “extreme measures” left for the Treasury to use, including the previously mentioned platinum coin seigniorage and consols. Treasury has not used these measures, but an analysis of the situation that ignores them and leaves the impression that ALL “extreme measures” will shortly be used up is at best incomplete; at worst, misleading; and also lets the Administration off the hook when they do have alternatives to either letting the Republicans push the Government into default; or giving in to or compromising with them on their demands.

Over my last few posts, I’ve focused on “progressives” mis-characterizing fiscal issues rather than on Republicans or conservatives doing so. Why is this important? Because the only chance for change that helps the 99% is for people who care about them to get the education right and tell them the truth. I don’t know if Washington villagers aren’t doing that because they’re ignorant, or bought, or are afraid they’ll look silly if they tell the truth, or are just trying to put forward short statements about issues that they think must inevitably oversimplify the landscape of thought about issues. But whatever the motivation is for their very filtered communication, its systematic nature, with all the denizens of DC avoiding certain subjects, since the President declared them “off the table”, even at the cost of factual errors in their statements, is unacceptable because it damages democracy by unduly limiting the frames and alternatives that they “broadcast” to people; damaging their ability to learn and to make their own personal choices about what they will think.

It’s one thing for conservatives to do this, because they believe in Plato’s noble lie anyway. But for progressives it’s simply a travesty and must stop now. Bloggers at CAF must know by now that there are such things as platinum coins and consols and governments that, even without further debt issuance, cannot run out of money unless they deliberately choose to do so. To believe otherwise is to believe that they live under a rock. They need to begin recognizing these possibilities in their writing, because the progressives they are writing for need to go beyond taxing, borrowing, and spending, when they think about fiscal policy and our spending limits.

9 responses to “Does the Debt Ceiling Have to Be Raised?

  1. I think we have seen this movie before. Can someone create a different ending or maybe just change the channel. I hear the Olympics are about to start :-0). I like your script better, Joe.

  2. I’m afraid you, and MMT in general, are suffering from Rodney Dangerfield syndrome. You don’t get no respect.

  3. Excellent points Dr. Firestone.

    What the President has taken off the table HVPCS ought to be highlighted in as many venues as possible as a potential solution if he really intends to implement a go-it-alone strategy. As I’ve written before, the $100 trillion HVPCS carried to its logical conclusion, as a form of currency, can be used to eliminate state and local taxes. A powerful incentive for local officials seeking voter approval of reasonable fiscal policies for a struggling state wide electorate.

    These officials aware of this alternative would pressure national legislators to appropriate sufficient funding to allow HVPCS funding for state and local budgets. And in turn, eliminate debt financing through corrupt commercial bond markets.

  4. I agree with Sunflowerbio – we’ve seen this too many times before. So many subjects of conversation are like this – Ed Snowden and NSA, income inequality, health care, the debt ceiling. All are framed in the most unrealistic terms imaginable, where any sensible solution is not only off the table, but out of mind.

    Thanks for trying to change the conversation.

  5. At least let’s start calling it the “net financial wealth ceiling”.

  6. That Politico article and the comments that follow it are very disappointing. The lack of knowledge about the nature of the federal debt and deficit is disappointing. The inability to recognize that the ever increasing “debt” number begins its climb following the end of Bretton Woods and the discontinuation of US Notes by Congress which led to the features that we are all now so well acquainted with of the current monetary system is disappointing. I’m left with the statement well-known in science regarding false and inadequate theories, “Theories don’t die; theorists do.”

    • Actually it is Max Planck (Physicist) who said:

      ‘A new scientific truth does not triumph by convincing its opponents and making them see light, but rather because its opponents eventually die, and a new generation grows up that is familiar with it.’

  7. Government-Guaranteed Dollar-Wealth Limit ?