Questioning the National Debt

There is a laughable proposition — advanced by Treasury secretary Timothy Geithner, among others — that Congress may not limit the national* debt. This proposition is based on a skewed reading of Section 4 of Amendment XIV to the Constitution. That amendment was approved by Congress in 1866 and ratified in 1868.

Here is Section 4, in full:

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

The first sentence — the “authority” for Geithner’s proposition — simply means that the government of the United States cannot repudiate indebtedness it has already incurred. The obvious purpose of the first sentence was to prevent future Congresses — which might be controlled by Democrats — from reneging on obligations incurred by the winning (mainly Republican**) side in the Civil War.

Putting a legal limit on the issuance of debt is not the same thing as repudiating debt already incurred. A limit on the amount of debt that the government may issue is the equivalent of stop sign; it means that the government must take steps to prevent the net accumulation of additional debt. It is up to Congress to determine the precise steps — some combination of tax increases and spending reductions — or to “repudiate” the debt ceiling by raising or eliminating it.

A responsible Congress would take steps to ensure against the growth of the debt by reducing commitments to the growth of  “entitlement” programs: Social Security, Medicare, and Medicaid. Those reductions are necessary — for the sake of America’s future — whether or not there is a debt ceiling. One could even argue that the existence of a debt ceiling — one that is always somewhat higher than the current level of debt — has encouraged Congress to make irresponsible spending commitments.

* The so-called national debt is, in fact, the indebtedness of the government of the United States. It arises from the actions of that government, not from the private actions of individuals. It is “national” only in the sense that the taxpayers of the nation are ultimately responsible for repayment of the debt and interest thereon.

** The Civil War was partisan as well as sectional. The 36th Congress, which was in session before the outbreak of the war, was divided as follows: 116 Republicans to 83 Democrats in the House; 26 Republicans to 38 Democrats in the Senate. Because of the war, and losses of seats by seceding States, the Republican Party held a firm grip on Congress in 1866: 136 Republicans to 38 Democrats in the House; 39 Republicans to 11 Democrats in the Senate.

Related reading:
Debt-Limit Silliness, at NRO (follow the links)
We Cannot Pretend the Debt Ceiling Is Unconstitutional, at The NYT (straight talk from a leftist, of all things)

Related posts:
The “Forthcoming Financial Collapse”
We’re from the Government and We’re Here to Help You
Estimating the Rahn Curve: Or, How Government Inhibits Economic Growth
The Deficit Commission’s Deficit of Understanding
The Bowles-Simpson Report
The Bowles-Simpson Band-Aid
America’s Financial Crisis Is Now