How To End These Threats of Default

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The New York Sun

The endorsement by Janet Yellen of the “End the Threat of Default Act” is what caught our attention in the Treasury Secretary’s testimony yesterday before the House. One of the bill’s sponsors, Sean Casten of Illinois, asked where she stood on ending the debt ceiling. She endorsed it, saying that it’s “very destructive” to put her and President Biden in a situation “where we might be unable to pay the bills.”

We are tucking Mrs. Yellen’s comments into a folder called “the confounded Constitution” — and Mr. Casten’s question under the heading “the self-hating Congress.” Mr. Casten started out by suggesting that the current panic over the debt ceiling is one of our “manufactured crises.” Congress, he noted, has voted to approve our spending and decide how much of it will be paid for with tax revenues.

Then he claimed that “somewhat uniquely we give ourselves the authority to decide how much of the residual, which is paid with debt, we are going to pay for.” Congress, though, doesn’t give itself that authority. The Constitution grants Congress — and solely Congress — the power to borrow on the credit of the United States. Mr. Casten calls it “political suicide.” He wants to “take that authority away from Congress.” Mrs. Yellen agrees.

Our own view is that the two of them ought to go read 10 Federalist. That’s the newspaper column in which James Madison sought to reassure New Yorkers that the union would be a safeguard against faction and insurrection. In it, he warns against, among other things, a “rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project.”

Those vices are the causes in which the Democrats — and, all too often, Republicans — have racked up these enormous debts the Congress is now being asked to cover by borrowing yet more trillions. We comprehend that a default would be a catastrophe, to use Secretary Yellen’s word. And we wouldn’t want to be interpreted as courting a default. We’re less convinced that a default would be a worse catastrophe than the era of fiat money.

Plus, too, it depends on what the meaning of default is. Secretary Yellen and other apologists for the era of fiat money like to dramatize these debt limit crises by saying our country has never defaulted. We, though, would argue that what President Roosevelt did in October 1933, when he devalued the dollar to a 35th of an ounce of gold from a less than a 20th of an ounce, was a default. So was Nixon’s closing the gold window in 1971.

That might be a minority opinion, but it’s ours. That led to Congress removing from our laws any reference to the redemption of our money in gold. Take a dollar to the Treasury today and all one’ll get in exchange is another paper dollar or base metal slugs. In terms of real money — specie — our currency has lost nearly all of its value since FDR began the debasement.

The view of the Sun is that if Casten, Yellen, Powell & Co. want to end the threat of default, as the title of Mr. Casten’s bill puts it, the ideal way would be to establish a monetary commission to look into a restoration of honest money. That would do more than any other act we can think of to help Congress and other institutions that play a role in our monetary policy to steer away from excessive spending and reckless borrowing that have precipitated this crisis.


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