US Government Debt Different - Finance Department - University of ...

48 Origins of the Fiscal Constitutionrized by statute rather than royal whim. This, along with the creationof the Bank of England, and decades of prudent financial management,led to what economic historians call the Financial Revolution.It enabled Britain to borrow vast sums of money at low rates – a criticaladvantage in the wars against France. It also converted the publicdebt into a reliable liquid asset, thus expanding the money supplyand facilitating Britain’s remarkable economic boom. The secret ofAlexander Hamilton’s financial plan for the new United States was toimitate the Financial Revolution in America.The Constitution thus contains a clause replicating the GloriousRevolution’s settlement of the borrowing question. Article I, Section8, Clause 2 grants Congress – not the President – the authority “toborrow money on the credit of the United States.” Originally, Congressexercised its borrowing power by authorizing each individualbond issue. During World War I, for the first time, Congress delegateddiscretionary authority to the executive to manage the specificsof the borrowing, within a certain limit, now called the debt ceiling.Congress has raised the limit 92 times since 1940. Often, this hasbeen uncontroversial, but in recent years, when the Presidency andat least one House of Congress are controlled by different parties,the debt ceiling has become a political football. We have reached thecrisis point with the ceiling three times: first, in 1985, under a RepublicanPresident with a Democratic House; second, in 1995-96,under a Democratic President with a Republican Congress; and now,in 2011, under a Democratic President with a Republican House. Ipoint this out because some partisans like to claim that one or theother party is especially responsible for the brinkmanship. In fact,they behave symmetrically.The so-called “debt ceiling” is not actually a statutory limitation onthe executive’s power to borrow. The statute containing the debt ceilingis a grant of authority the President would not otherwise have.When that authority runs out, it is the Constitution that preventsthe President from attempting to borrow on the credit of the UnitedStates.Some people wonder what prevents the President from ignoring thedebt ceiling and simply borrowing more. Would the courts inter-