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

Concluding ThoughtsHowell E. Jackson67One of the paradoxes of debt ceiling crises is that the part of thegovernment best equipped to engage in advance planning for theconduct of government business in a Phase Two Debt Crisis hasstrong political incentives to avoid any public discussion of sensibleplanning procedures. In the months and weeks leading up to a debtceiling crisis, the Executive’s primary goal is to force congressionalcompromises by suggesting that the consequences of failing to raisethe public debt ceiling will be unpredictable and unpalatable to awide range of important constituencies. However, should the debtceiling ever actually be reached and should a Phase Two Debt Crisisensue, the incentives of the Executive will transform overnight.Rather than raising the specter of dire consequences, the focus ofgovernment policy would then be to convey to the general publicand the capital markets that a prudent, legally-defensible, andeconomically-efficient plan for addressing government payments isin place and capable of preserving fiscal stability while the politicalbranches work out a longer-term compromise.In my view, payment rules derived solely from obscure ReconstructionEra constitutional provisions or controversial theories of inherentauthority are unlikely to have the desired effect. Rather a sensiblesystem of prioritization – likely built off of a FIFO paymentplan adjusted to honor debt service payments under the Public DebtClause as well as Social Security and perhaps other trust fund paymentsunder 42 U.S.C. § 1320B–15 – is the most attractive path.To the extent that the prioritization decisions are supported throughinvocation of the Impoundment Act’s rules of deferral and other potentiallyapplicable federal budget laws, so much the better. Whileone might wish that we lived in a country where Phase Two DebtCrises were impossible to imagine, we no longer inhabit that world.Thus, we have no choice but to plan for crisis in a manner that is asconsistent as possible with the rule of law, and to map out a course ofgovernmental action that will minimize disruption and uncertainty.The dynamics of political brinksmanship may make it difficult forthe Executive to plan for a Phase Two Debt Crisis in the public view,but the academic community and independent analysts are under