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

Howell E. JacksonWhile assertions of inherent Executive authority raise deep and unsettledquestions of law, I am dubious that Treasury Department officialsare likely to resort to these theories to ignore entirely a congressionallyimposed debt ceiling in the face of a Phase Two DebtCeiling crisis. The government officials who manage the public debtand would be required to defend their actions before Congress in thewake of a constitutional confrontation live and work within a systemof well-defined rules and external controls. For personnel fromthe Office of Fiscal Service to invoke vague and untested theoriesof Executive Supremacy would require a considerable leap of faithinto unfamiliar and uncomfortable territory. Moreover, unlike othercontexts where the Executive has invoked emergency powers – covertoperations and other matters of national security – debt ceiling crisesare played out in the public eye and reactions to unilateral Executiveaction would provoke immediate and hostile responses. Finally,in the face of such controversies, one cannot be at all clear that thecapital markets would find palatable the purchase of public debt issuedin the absence of express congressional authorization. Whetherthat debt would be supported by the full faith and credit of the U.S.government and the implications for the secondary market pricingof previously issued government debt are imponderables that wouldfurther discourage most Treasury Department officials from venturingtoo deeply down the rabbit hole of inherent Executive powers.61B. Systems of Spending PrioritizationBut if the Executive is unlikely to ignore the debt ceiling completely,how might it go about resolving an imbalance of expenditures andrevenues in the face of a Phase Two Debt Crisis? In other words, ifthe government did lack sufficient cash resources to pay all of its billsas they came due, how might its available cash be allocated? A numberof approaches are possible. 61. FIFO and Other Mechanical ApproachesPerhaps the most commonly suggested approach to dealing with aPhase Two Crisis is a mechanical, “First in, First Out (FIFO)” rule,whereby the government simply pays its bills as they are received.6 A more detailed discussion of these possibilities appears in Part II of Appendix A.