Krugman blog today:
Once again: S&P declared that US debt is no longer a safe investment; yet investors are piling into US debt, not out of it . . . amounts to a massive market rejection of S&P’s concerns.
. . . that downgrade will bully policy makers into even more deflationary, contractionary policies than they would have undertaken otherwise, which has the perverse effect of making US debt more attractive, since the alternatives are worse.
. . . to those claiming that falling stock prices somehow validate S&P: hey, guys, these people weren’t rating stocks, they were rating US debt — and the price of that debt has gone UP.
In an earlier post, kitchenmudge asked if this nation ever had a balanced budget. I don’t know, but this post says the last time we did it was 1957. He has some nice clean tables there. In this one, note that the deficit went down every one of Clinton’s 8 years in office and it went up in 7 of 8 years of George Bush. Say no more.
And this is a good summary of historic trends in our debt; it sounds like any law demanding a balanced budget would preclude our ability to go to war since wars are always fought on borrowed money. I’ve faulted GW Bush for that, but the real problem was that he simultaneously implemented huge tax cuts.
The United States has had public debt since its inception. Debts incurred during the American Revolutionary War and under the Articles of Confederation led to the first yearly reported value of $75,463,476.52 on January 1, 1791. From 1796 to 1811 there were 14 surpluses and only 2 deficits. The first dramatic growth spurt of the debt occurred because of the War of 1812. In the first 20 years following the War of 1812, 18 surpluses were experienced and the US paid off 99.97% of its debt.
The second dramatic growth spurt of the debt occurred because of the Civil War. The debt was just $65 million in 1860, but passed $1 billion in 1863 and had reached $2.7 billion following the war. In the following 47 years America returned to the practice of running surpluses during times of peace experiencing 36 surpluses and only 11 deficits. During this period 55% of the US national debt was paid off.
The next period of major growth in debt came during WWI reaching $25.5 billion at its conclusion. It was followed by 11 straight surpluses and saw the debt reduced by 36%.
As rhetoric heats up about the debt ceiling (not to mention the indignity of being ordered to come to work on a weekend), a new talking point has emerged. This is very interesting – expect sputtering rage when the radio talkers retake the air on Tuesday morning. From the linked post at Crooks & Liars:
It’s an untested concept, but rooted in some really strong history. I cannot recommend this post enough for the backstory and history around the adoption of Section Four of the Fourteenth Amendment:
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.
When I first heard about this I was completely confused as to how language about the public debt became part of a constitutional amendment, which is why you really must read the post on Balkanization. Here’s a snippet:
What do we learn from this history? If Wade’s speech offers the central rationale for Section Four, the goal was to remove threats of default on federal debts from partisan struggle. Reconstruction Republicans feared that Democrats, once admitted to Congress would use their majorities to default on obligations they did disliked politically. More generally, as Wade explained, “every man who has property in the public funds will feel safer when he sees that the national debt is withdrawn from the power of a Congress to repudiate it and placed under the guardianship of the Constitution than he would feel if it were left at loose ends and subject to the varying majorities which may arise in Congress.”
more from Jon Chait:
This means that the very existence of the debt limit is unconstitutional because it calls into question the validity of the debt. So would any other provision of law. That is a key reason why Congress created a permanent appropriation for interest payments at the same time that the Fourteenth Amendment was debated. Previously, Congress had to pass annual appropriations for interest.
Paul Krugman also had a word on the same subject yesterday.
UPDATE: I urge you to read the comment below by John Nail re a 1935 ruling by the Supreme Court on this very matter.
Posted in Civics, Current Events, economy, Government, History, Politics
Tagged debt, debt ceiling, Fourteenth Amendment to the United States Constitution, Republicans, United States Constitution, United States public debt
As Congress faces the vote to raise the debt ceiling – something we do every year – the blogosphere is full of posts on the subject. Posts by blogfriends Kay and BeneathTheTinFoilHat led me to Perspectives where there is lots of bloggy goodness on the subject. This chart caught my attention.