Outgoing Treasury Secretary Jack Lew called Wednesday for Congress to overhaul the debt ceiling so that it can no longer be used to threaten default by the federal government, calling the current law “nihilistic” and a “weapon that irresponsible actors in Congress can use to threaten our economic well-being.”
Lew’s criticism of the federal debt ceiling, published in the Harvard Journal of Legislation, comes just weeks before President-elect Trump is set to take office. Traditionally, Congress has used the debt ceiling as a tool for extracting concessions out of the White House. The debt ceiling will have to be raised in March or the Trump Treasury Department will have to use extraordinary measures to free up cash to pay incoming bills, buying several months of time.
The debt ceiling prevents the Treasury from issuing any new debt above a certain limit, and it can be raised only by Congress.
In the 1980s and 1990s, the debt ceiling was used as a deadline for prompting fiscal negotiations, Lew wrote. During the Obama years, however, raising it has become more tense, with the “threat of default employed as an affirmative bargaining chip in a way that is unprecedented and dangerous.”
In his article, Lew addressed one of the Republican criticisms of his management of the debt ceiling, namely the claim that the Treasury could have used incoming tax revenue to ensure that the principal and interest on the federal debt were always paid on time, taking the threat of a default on Treasury securities and a global financial crisis off the table.
Prioritizing payments would be “technologically feasible,” but “fraught with risk,” Lew said.
He added, “my great fear is that one day congressional miscalculation and inaction will result in an accidental default of the U.S. government, which in and of itself could have major consequences.”
In 2013, Congress waited until just days before the possibility of the government missing a payment to raise the debt ceiling.
Lew recommended getting rid of the debt ceiling entirely or changing it to eliminate the possibility of a default.
