It looks like the next big monetary — and fiscal — story is going to be the discovery that the bill President Biden just signed contains no debt ceiling at all. None. There used to be a debt ceiling of some $31.4 trillion. In January 2025 the debt ceiling will come back. Meantime, the oxymoronic Fiscal Responsibility Act of 2023 removed the borrowing ceiling, and the government is going to the debt markets like a hog to the trough.

This drew little attention in the last-minute scramble to prevent a default. Stoking that sense of crisis is partly what the debt ceiling talks are designed to do. The noble comrades of the press were so set on recording the heroism of the budgeteers — their tense negotiations, high-minded rhetoric, and the exchange of gumbo recipes — that they failed to work this angle. Yet feature the astonishing fact the debt ceiling deal has, it turns out, no ceiling.

Now we understand that some will say there is a kind of ceiling in the pact — the borrowing, it states, must be for “necessary obligations.” Meaning, money needed “to fund a commitment” that requires payment before the new ceiling expires on January 2, 2025. Nor, the pact says, may the Treasury try to increase Uncle Sam’s “cash balance above normal operating balances in anticipation of the expiration” of the new debt limit. 

Such assurances are undercut by the fungibility of money. Money brought in under a set of restrictions can free up money that is not restricted. In other words, who’s to say which tranche of borrowed cash will go to settle which federal obligation? In theory, the debt pact could authorize Mr. Biden’s Treasury department to borrow up to the full amount of funds appropriated by the Congress, independent of tax revenue.

Plus, too, we are well aware that before the deal contrived between Speaker McCarthy and Mr. Biden, there were similar enactments by the Congress — seven by our count — in which the debt ceiling has been suspended until a certain date, rather than raised to a specific amount. Yet it’s hard to recall a moment when a suspension has been accompanied by such a feeding at the trough as we are seeing today.

A debt “tsunami,” as Bloomberg puts it, is hitting markets as “$1 trillion or more” in bills and bonds is set to be issued by the Treasury per the Fiscal Responsibility Act. As bad as a default would be, this harvest of debt — the fruit of congressional profligacy — is just as vexing. Uncle Sam is “draining liquidity from the banking sector,” Bloomberg says, “raising short-term funding rates and tightening the screws” on an economy limping toward recession.

The borrowing frenzy, by taking out of the markets capital that could have been put to productive use by private enterprise, “could have the same economic impact as a quarter-point interest-rate hike by the Federal Reserve,” Bank of America bristles. This debt tsunami could, as a result, be compounded by the Fed’s anticipated decision to hold off on raising interest rates when its Open Market Committee meeting this week.

The flood of federal paper under the suspended debt limit could prove a preview of coming attractions. The left is urging the Biden administration to drop the debt ceiling entirely, the Times reports, to stop it “from continuing to be a political tool.” Liberals eye “abolishing the debt ceiling,” the Times says, or “using the 14th Amendment” to deem a limit “unconstitutional.” This overlooks the history of the debt ceiling, which was created in 1917.

Before that, Congress had the power to approve or deny every bond issue. The ceiling was created with the assurance that the Gold Standard Act of 1900 was still the law of the land. Dollars were defined by law as specie, and convertible in gold. This put a brake on excessive spending, and borrowing, by the government. Today there is no such limit on Uncle Sam’s voracity — and the tsunami of red ink shows the peril of forgoing a ceiling on debt in the age of fiat money.