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The Debt Ceiling: What Could Possibly Go Wrong?
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Now that a deal in principle has been reached to suspend the debt limit before the United States runs out of money to pay its bills, the question is, how do we keep getting to this point? Negotiating the debt ceiling has become a given in American fiscal policy, but its origins remain mystifyingly complex. Today, Professors Richard Squire and Thomas Lee join us to help untangle the financial and legal issues around raising the debt ceiling. Richard is a business law scholar and a professor here at Fordham Law, where he’s also the Faculty Director of the Fordham Law Center. Tom is the Leitner Family Professor of International Law at Fordham Law as well as a constitutional and international law expert, counsel at Hughes Hubbard & Reed, and former Pentagon counsel and US naval cryptology officer. Join us for today’s episode as these esteemed members of the Fordham Law faculty share both contemporary and historical perspectives on the debt ceiling (including notable phrases from the 14th Amendment), unpack some of the consequences of a US Treasury default, discuss what it would mean to mint a coin worth a trillion dollars, plus a whole lot more. For a fascinating (and highly entertaining) take on US fiscal policy, be sure to tune in!
Key Points From This Episode:
• Defining what the debt ceiling is and what it means for the US.
• Insight into the origin, history, and evolution of the debt ceiling.
• The debt ceiling and the 14th Amendment: terms from Section 4 that are worth noting.
• Instances when the US has defaulted on its debts.
• How a debt default could shock the financial markets and cause global financial chaos.
• Why it's no coincidence that the debt ceiling limits originated in 1939.
• Correlations between government spending and war (and the financial strain it creates).
• An example of the systemic consequences that a US Treasury default would have.
• Basket collateral: what one could theoretically use in place of US Treasury Bonds.
• Minting a trillion-dollar coin and other alternatives to striking a debt limit deal.
• Examining the terminology of the 14th Amendment, particularly the word “validity.”
• Attempting to answer the looming question: why have a debt limit in the first place?
• Speculation about what would happen if we eliminated the debt ceiling.
• Pros and cons of setting the debt limit as a percentage of GDP instead of an absolute amount.
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