Government Debt Counts, Unless It Doesn't

On Oct. 15, representative Alcee Hasting of Florida introduced H.R. 3293 or the so-called debt limit reform act. As usual with government bill naming process, the name sounds just good enough to garner support. However, read the text below of this rather short bill.

HR 3293 IH
113th CONGRESS 1st Session H. R. 3293 To reform the public debt limit.
IN THE HOUSE OF REPRESENTATIVES

October 15, 2013

Mr. HASTINGS of Florida introduced the following bill; which was referred to the Committee on Ways and Means

---

A BILL To reform the public debt limit.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Debt Limit Reform Act’.

SEC. 2. REFORM OF THE PUBLIC DEBT LIMIT.

(a) Authority of President To Increase Public Debt Limit- Section 3101 of title 31, United States Code, is amended by adding at the end the following new subsection:


‘(d) The dollar amount in effect under subsection (b) shall be increased at such times and in such amounts as the President of the United States, or his designee, may provide.’.

(b) Government-Held Debt Not Taken Into Account for Purposes of the Public Debt Limit- Section 3101 of title 31, United States Code, as amended by subsection (a) is amended by adding at the end the following new subsection:


‘(e) Obligations held by the United States Government (including any obligation which is classified as an intragovernmental holding by the Secretary of the Treasury or which is held by any agency or instrumentality of the United States) shall not be taken into account for purposes of applying the limitation imposed under subsection (b).’.

If you are still awake after reading the albeit short legalize, reread part (e) again if you missed it. The bill proposes that all inter-government debt will not count as debt. Think about the bill for a minute and its implications. Most inter-government owned debt is owned as collateral against claims for services such social security or government pensions or by quasi-government entities like the Federal Reserve. If the debt is not counted, will the debt be counted as an asset against projected benefits? Additionally, what will occur if and when (more likely when) social security and other similar government sponsored pass-through services go cash-flow negative and if there is no 'asset-claim'? More so, what happens to the money stock that was created in regards to this debt? Now I should tell you that govtrack gives this bills passage a very low probability. However, bad bills tend to reappear in other forms and just because some accountant wants to bend reality and disregard actual claims does not make those claims go away. Just ask the stakeholders of Enron.