Debt Digest | The Debt Limit and the 14th Amendment
Links & Fiscal Facts
Here are this week’s reading links and fiscal facts:
Debt limit dealmaking is necessary and normal. As the Manhattan Institute’s Brian Riedl explains, all eight of the largest deficit-reduction laws since 1985 were attached to debt limit bills. A majority of likely voters, 74 percent, want President Biden to negotiate to find common ground on the upcoming debt limit, including reductions in government spending. Boccia argues that such a deal should include new limits on discretionary spending, mandatory spending cuts, and reforms to Medicare and Social Security put forth by an independent commission.
Boccia discusses the debt limit on CNBC’s Squawk Box here.
The President must abide by the debt limit. According to some reports, Biden’s advisors are contemplating violating the congressional debt limit based on a “far-fetched interpretation of Section 4 of the 14th Amendment.” As Stanford Law Professor Michael McConnell explains, “Section 4 prevents the only institution of government that could deny the validity of the debt — namely, Congress — from doing so…even if the president were to issue new bonds without congressional authorization, the text of Section 4 makes plain that these bonds would not be constitutionally binding.”
Federal health spending is unsustainable. Paul Winfree, formerly at the Heritage Foundation, estimates that federal health spending will compromise the government’s ability to borrow money within the next 25 to 50 years. “This means that spending on federal health programs without structural reforms will significantly limit the federal government’s ability to take on additional debt to address a future economic recession, pandemic, war, or another adverse event.” Cato’s Michael Cannon lays out the case for limiting the growth of Medicare spending here.
The U.S. is among the most indebted governments in the world. According to the International Monetary Fund’s (IMF) measure of central government debt, the U.S. ranks 16th highest out of 164 countries with federal debt reaching 115 percent of gross domestic product (GDP). See the Tax Foundation’s chart below for a cross-national comparison. “In 2001, U.S. federal debt was 42 percent of GDP, lower than debt levels found in 100 other countries,” writes William McBride of the Tax Foundation. Boccia explains the long-term outlook of the country’s financial health here.
