House Democrats Propose Eliminating Debt Ceiling; Yellen Shoots Down $1 Trillion Coin
House Democrats are divided on whether it is time for the debt ceiling to be lifted and unlimited borrowing allowed so the government can spend what it wants.
The federal government is embroiled in yet another fight over the debt limit after Washington exceeded its borrowing limit by $31.4 trillion last week.
Therefore, the Treasury Department employs “extraordinary measures” to help cover the government’s obligations until June, when these tools will be exhausted.
According to a survey, Republicans want a debt-prioritization program that reduces the record growth in federal spending before allowing for an increase in the debt limit. draft GOP proposal. A chorus of Democrats argue that it would better for officials to vote to cancel the debt limit, and let the government borrow freely without any limitation or restraint from Congress.
Rep. Bill Foster (D.Ill), proposed legislation entitled “End the Threat of Default Act” (pdf), which was co-sponsored by 42 House Democrats, including Reps. Rashida Tlaib (D-Mich.), Pramila Jayapal (Wash.), and Sheila Jackson Lee (D-Texas).
Foster compared the situation to “ordering an expensive meal at a restaurant, eating it, and skipping out without payment.”
“Weaponizing the debt ceiling and using it as a pawn in partisan budget negotiations is dangerous and repeatedly brings our nation to the brink of default, which would be disastrous to the U.S. economy – something we’ve witnessed as recently as 2011 when Republicans created a debt ceiling crisis that resulted in the first ever downgrade to the U.S. credit rating,” He stated this in a statement.
“We can and should have a real conversation about overall spending, but the full faith and credit of the United States must never be compromised.”
The federal government expects to spend over $6 trillion in the fourth consecutive fiscal years, 2023.
Congress has acted on debt ceiling issues more than 75 times since 1960. They have temporarily extended, raised, and modified the definition of the limit.
The debt ceiling was not abolished by congressional Democrats for the first time.
More than two dozen House Democrats wrote a October resolution. letter Nancy Pelosi (D.Calif.), the then-House Speaker, and Chuck Schumer the Senate Majority Leader, to support a bill which would allow the Treasury Secretary unilaterally to increase or eliminate the federal debt limit.
“If the counterintuitive nature of the current debt ceiling process is not reason enough to drive change, then the prospect of Republicans sending our economy into default for political gain should be,” According to the letter.
“Republicans have repeatedly signaled that they are willing and eager to use the debt limit as a bargaining tool if given the opportunity, and we should take them at their word.”
President Joe Biden rejected It is the idea. “irresponsible.”
The $1 Trillion coin is back
Left-leaning economists, as well as Democratic lawmakers, have proposed the idea of minting $1 trillion worth of platinum coins. These would be deposited at the Federal Reserve and allow politicians to withdraw funds from the account.
Paul Krugman, an economist, was a key figure in the debt ceiling crisis of 2013. urged This idea should be explored by the Treasury Department, even if they are not already “looked silly for a couple of minutes.”
A little over a decade later, the proposal was again championed by him. writing In October 2021, the Biden White House “should mint a $1 trillion platinum coin or declare that the Constitution gives it the right to issue whatever debt is needed to fund the government.”
Recent reports suggest that some administration officials and others have considered the possibility that the Treasury could rely on an obscure law to approve the creation of a $1 Trillion coin.
According to supporters, Section 31 U.S. Code Section 5112 The Treasury has the legal authority and power to issue platinum coins “The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.”
But, speaking in interview Janet Yellen, Treasury Secretary to The Wall Street Journal, noted that it wasn’t certain that the central banks would accept the currency.
“It truly is not by any means to be taken as a given that the Fed would do it, and I think especially with something that’s a gimmick,” She spoke to the newspaper Sunday. “The Fed is not required to accept it, there’s no requirement on the part of the Fed. It’s up to them what to do.”
This scheme has been criticized by many. One major complaint is that the Fed would be forced to credit Treasury with non-existent currency, which would mean the institution would need expand the money supply to create inflation.
A second criticism is that the coin will have a face value of $1 trillion and not an intrinsic value.
The opponents claim that it would set precedent for future governments in minting a coin that could pay for their shortfalls. It also sends signals to potential investors that both the U.S. government as well as the economy are in chaos.
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