VTI - U.S. Faces 'Constitutional Crisis' Over Debt Ceiling Dead Lock Yellen Warns

2023-05-08 11:06:42 ET

Summary

• The time limit seems to be somewhere near June 1, 2023.
• Treasury Secretary Janet Yellen has announced the date.
• But, the players are still acting like children.
• The debt ceiling is way out-of-date and must be done away with.
• But, moving forward, the politicians must begin to act like adults and behave in a much more responsible way when it comes to managing the government's budget.

This is the headline seen on the front page of the Financial Times on Monday morning.

"US Treasury Secretary Janet Yellen has warned of a 'constitutional crisis' that risks economic and financial catastrophe if Congress does not raise the federal debt limit, with the government in danger of running out of cash in the absence of new borrowing capacity."

Ms. Yellen is quoted as saying, “If Congress fails to meet its responsibility, there are simply no good options.”

Where have we heard this before?

Well, Laurence Tribe (University Professor emeritus at Harvard) presents us with the picture in a piece in the New York Times .

"The theory builds on Section 4 of the 14th Amendment to argue that Congress, without realizing it, set itself on a path that would violate the Constitution when, in 1917, it capped the size of the federal debt. Over the years, Congress has raised the debt ceiling scores of times, most recently two years ago, when it set the cap at $31.4 trillion. We hit that amount on January 19 and are being told that the 'extraordinary measures" Treasury has available to get around it are about to run out. When that happens, all hell will break loose."

Read this part again...

"Over the years, Congress has raised the debt ceiling scores of times...."

To me, this is just childish behavior!

The debt ceiling causes turmoil.

One political party cries out that the other party has behaved very, very badly, and needs to be brought under control.

This year it is the Republican Party that is calling out the Democratic Party.

Two years ago it was the Democratic Party calling out the Republican Party.

And, so on, and so on, and so on.

Yes, this is just childish behavior.

And, it should come to an end.

Yes, the political party that is running the government this time around should act in a responsible way with respect to the government budget.

In my way of thinking, the government budget should minimize the amount of deficit spending that takes place.

In this context, Bill Clinton was the last president to act in a responsible way. His administration even produced a budget surplus or two.

But, it is the American people that should hold the government to task with respect to how the government's budget is managed.

The Right Question

Mr. Tribe, in his New York Times editorial, presents the issue in this way:

"The right question is whether the Congress--after passing the spending bills that created these debts in the first place--can invoke an arbitrary dollar limit to force the president and his administration to do its bidding."

"There is only one right answer to that question, and it is no."

"And there is only one person with the power to give Congress that answer: the president of the United States."

The United States needs to run its budget process in a responsible way.

In its position as a world leader in finance and monetary affairs, it must run its operations as a responsible adult would run his or her operations.

Being able to issue debt as the country that also maintains the world's reserve currency, the U.S. dollar, does not mean it can just playfully issue more debt here and more debt there.

The United States must maintain its budget in a way that shows its strength to the world.

The United States must aim to balance its budget as much as it can. U.S. debt must be minimized. The United States must set an example to the world.

No more of this childish behavior.

The Future

Right now the government must get through the current crisis.

But, we must not get to the point of a "constitutional crisis."

Let's just have a budget crisis and reform the system and move on into the future.

It is a time for politicians to act like mature adults and not just call out names across the aisle.

It is time for the politicians to act in the best interest of the country.

Democrats and Republicans must move to constrain the debt and begin to budget in a more responsible manner. It will be a while before the deficit can be really brought under control, but the focus of the government must change.

More attention must be given to minimizing the debt created if the deficit cannot be totally brought under control.

But, it is time for the politicians to begin acting as adults.

We need to see some evidence that they understand that their behavior needs to change.

Keep your fingers crossed.

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