The Corner

If Congress Doesn’t Raise the Debt Ceiling . . .

. . . here’s a list of assets that Treasury can use to avoid default. My colleague Jason Fichtner and I put the list together after being asked over and over again what Treasury can possibly do if the debt ceiling isn’t raised.

Congress has raised the debt ceiling ten times in the last ten years. Raising the debt ceiling for the eleventh time in as many years without recognizing and correcting the systemic problems, and instituting real spending reforms, would be irresponsible, and it would have consequences beyond merely tapping revenue and assets to meet FY 2011 budget commitments.

The United States should not consider defaulting on its debt, nor should it put itself in a position where it has to postpone payment to contractors or “manage” other non-debt obligations. However, Congress shouldn’t be forced to raise the debt ceiling under false pretenses. That’s why lawmakers should check this list of assets. There’s roughly $2 trillion in assets on that list, in addition to $2.2 trillion in tax revenue. (Lawyers may have a different take on this than we do.)

The bottom line is that the United States has enough expected cash flow (tax revenue) and assets on hand to avoid either defaulting or raising the debt ceiling without a firm commitment from Congress that it will control spending.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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