This debt ceiling crisis has been an interesting one. The result of the US Government not raising their debt ceiling would be catastrophic – the US government defaulting on its debts, the US dollar losing its status as a reserve currency, countless institutions and governments losing money on their investments in US treasuries. But because we’ve been here before, 103 times before to be exact, we all assume that there will be political posturing right up to the last minute before a 11th hour deal is struck.
But this high wire act of political posturing over $31 trillion of US Government debt is full of risk. One misstep or miscalculation of who you’re negotiating with and the US could miss the 5 June expected deadline (it is just an expected deadline, because no one knows the ~exact~ day that the US government will run out of money).
As a result, there has been plenty of discussion about possible Plan B’s. One idea is to challenge the debt ceiling as unconstitutional (the 14th amendment includes “the validity of the public debt of the United States… shall not be questioned). Another idea has been to print a ‘trillion-dollar coin’.
This article looks at the 1985 debt ceiling crisis (yes, this has been a recurring – and arguably completely unnecessary – feature of American politics for decades) and unpacks some of the novel ways that Reagan’s Treasury Department was able to move money around to keep the government solvent for longer.
In 1985, reports are that the US government was just hours away from default when a deal was reached. Let’s hope 2023’s deal doesn’t cut it so fine.
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