StanCollender'sCapitalGainsandGames Washington, Wall Street and Everything in Between

Want More Background on the Debt Ceiling?

20 Apr 2011
Posted by Stan Collender

Take a look at

this report from the GAO

about what the federal government can do if the federal debt ceiling is reached. It's especially good at describing the actions the Treasury has at its disposal.

It's a Good Report

I recommend that everyone who has an interest in this subject read the GAO report. It's balanced, unbiased and has some sensible suggestions as how the US budgetary process can be improved.

I've read a few posts here on CG&G in the recent past suggesting that the United States is the only major country in the world which requires legislative approval for raising the debt limit. I've also read quite recently here that those who support a US constitutional amendment to balance the budget are idiots, or worse. What the GAO study reveals though, is that quite a few OECD countries have debt limit rules. And, those idiots in Germany recently adopted a constitutional amendment limiting the amount of structural deficits to .35 percent of GDP. The fiscal fools in Switzerland have a similar constitutional restriction that they call a "debt brake".

The difference between the US and those other countries is the process around the debt limit legislation, not the fact that we have such legislation and others don't. The key difference is that most other countries decide first through legislation how much they can afford to spend, or at least require the debt limit to be raised at the same time a spending decision is made. In other words, they've got their horses in front of their carts.

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