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In Defense of the Debt Ceiling
CNBC.com | January 12, 2011 | 05:02 PM EST
Felix Salmon calls the debt ceiling ?built-in systemic stupidity? and asks why we have it at all.
I?m happy to provide the answer.
The first answer is that the constitution requires a debt ceiling, at least indirectly. Congress is saddled by the first article of the constitution with the power to ?borrow Money on the credit of the United States.? It long ago abdicated a portion of this power by enabling the Secretary of Treasury to approve debt issuances without the specific approval of Congress. But its not clear that, absent a constitutional amendment, Congress can delegate this power altogether.
Prior to 1917, Congress had to approve each individual issuance of US debt. This power was rarely used. The first post-constitutional issuance of national debt was undertaken to pay for the War of 1812. The next time the US government went to the debt markets was during the depression of 1837-1843. In these issuances, further votes of Congress were required to authorize the government to make principal and interest payments as they became due.
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