The Debt Ceiling Looms

Federal profligacy is such that, fresh on the heels of the national debt crossing the $40 trillion mark, Uncle Sam is set by May to hit the legal limit on borrowing. It was only last year, in the One Big Beautiful Bill Act, that the debt ceiling was elevated by $5 trillion to $41.1 trillion. Far from being chastened by this fiscal incontinence, President Trump is, per the Hill, “quietly pushing” GOP lawmakers to extend until 2029 any legal cap on borrowing.Mr. Trump is “keenly interested” in such a waiver of the ceiling, Senator John Thune tells the Hill. Before Congress agrees to loosen the federal belt, though, the solons have a chance to probe the root causes of the surging debt. Demands to raise or postpone the debt ceiling are best handled, as these columns urged during earlier debates, via “a compromise that keeps the government running but commits Congress to establishing a monetary commission.”It’s not our intention here to ignore the overspending that is a more obvious driver of the federal debt. Advocates of fiscal restraint, like Senator Rand Paul, are already balking at the idea of, in effect, writing Mr. Trump a blank check on borrowing. “If you’re really trying to curb the debt, you wouldn’t do a debt ceiling for two years. You’d try and use it as a lever to change things,” Senator Thom Tillis gripes. He points to the need for entitlement reform. That’s a goal, to be sure. It will be nigh impossible to make progress on the federal debt, though, without tackling the larger issue of reforming America’s monetary system. Our currency regime, we’ve averred, “lies at the heart of our debt, fiscal, and tax challenges.” The scale of today’s federal borrowing reflects the fact that a fiat dollar makes it easier for lawmakers to incur debt rather than spend within the confines of the nation’s fiscal means.By contrast, an honest money regime, like a gold standard, or even the less rigorous Bretton Woods system, imposes a kind of fiscal discipline on governments and central banks. As late as 1971, Uncle Sam was obligated to redeem dollars presented to it by foreign governments at the rate of a 35th of a gold ounce. The requirement of convertibility put a brake on federal spending and borrowing. Under a fiat dollar, the door is opened to fiscal irresponsibility.This fiat money regime is enabled by the Federal Reserve that was created as a steward of the dollar but that has presided over the currency’s collapse. The dollar today is valued at barely a 4,600th of an ounce. The greenback’s lack of convertibility allows the Fed to create billions of dollars, monetary sage James Grant has lamented, with a few taps of a keyboard. The vast debt was made possible, too, by the Fed for years holding interest rates artificially low.Hence the need for Congress, which holds the federal monetary powers assigned in the Constitution, to address these questions via a commission. The goal would be to examine how the Fed has performed, how America’s experiment in fiat money has fared, and to chart a path back to honest money. Raising the debt ceiling again without such a commission would be, in effect, to kick the can down the road to ruin.

The Debt Ceiling Looms

The Debt Ceiling Looms

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