So, this is interesting to me and I’d like to understand it better.
Last month the lame duck Senate signed off on the House/Senate Omnibus authorization bill that supposedly hamstrings the newly elected GPS house from having power of the purse until sometime next fall.
But now we are about to hit a debt ceiling limit. Does that mean without the house authorizing a debt ceiling increase that they actually have some leverage to pull back some of the spending in the omnibus?
GOP house, not GPS house
There’s a difference between the budget and the debt limit. McConnell and the Dems passed a law on the former but not the latter.
The US is the only major sovereign currency issuer to have a “debt limit” enacted in law. It is simply a number that the Congress uses to leverage their spending priorities between parties and branches of government. Because the Treasury can simply ask the Federal Reserve for all the money it needs to meet its obligations, it can never default on its obligations.
Expanding the money supply through government spending can create price inflation but there is no upper limit to its “debt” as we have seen from the trillions that were added during the pandemic. The Federal government doesn’t actually need taxes to “pay off” its debt because they created all the money that pays the taxes in the first place. It’s just a matter of whose pockets the money is in at any time, public pockets or government bank reserves.