The US debt ceiling mess shows why a Fiscal Council is a bad idea
SummaryThe failure of even the non-partisan Congressional Committee of Budget in preventing the debt cliff-edge has lessons for India
Treasury bills issued by the federal government in the United States, the ultimate in guaranteed assets, are held by central banks the world over, including the Reserve Bank of India. But the US Public Debt Act restricts Treasuries to an aggregate absolute ceiling, which can be raised only through legislative amendment of the act. This periodically triggers an excruciating bargaining process if the legislative majority is held by a political party opposed to that in executive power. With the possibility of a US default on Treasuries if the ceiling was not lifted by June 2023, a purely internal political face-off in the US became a serious threat to stability in global financial markets.