James K. Galbraith, a professor of government and business relations at the Lyndon B. Johnson School of Public Affairs at the University of Texas, is the author, most recently, of "Inequality and Instability" and the president of the Association for Evolutionary Economics.

The debt ceiling was enacted in 1917 for one purpose: to fool the rubes back home. Just as Congress started running up debts to pay for the war, they voted in the ceiling to pretend otherwise. And that is why whenever reached, it must be raised.



The debt ceiling is also an anachronism. It is based on the idea that the government must raise money from elsewhere, before it spends. That was true in the days of gold. It hasn't been true, for this country, since at least the creation of the Federal Reserve back in 1913.

When the Treasury writes a check, a bank credits an account. That's money creation. Treasury bonds absorb money, but aren't needed.

In the modern world, when the Treasury writes you a check, your bank credits your account. That's how money creation works. The Treasury then issues bonds to absorb that money. Banks like this because bonds pay more interest than reserves. But there is nothing economically necessary about the bonds. This is obvious since the Federal Reserve buys back many of them, leaving the public with the cash it would have had in the first place.

Could the Treasury skip the rigamarole and pay its bills without bonds? Economically, sure. Why doesn't it? Well, the Fed has regulations governing “overdrafts” -- but apart from these, the answer is plain: to do so would expose the “public debt” as a fiction, and the debt ceiling as a sham.

Under present law, Jack Lew could even pay off public debt held by the Federal Reserve by issuing a high-value, legal-tender coin – so long as the coin happened to be platinum. A coin is not debt, so that simple exchange would retire the Fed's debt holdings and lower the total public debt below any given ceiling.

That's a gimmick, sure. But so is the debt ceiling! Legally, the president's officers have the power to use one gimmick to deflate the other. Why don't they? The answer is again clear: they have been trapped by the bad-faith aura of this bad-faith law.

They have decreed that if the debt ceiling is breached, terrible things must happen. And therefore, if the ceiling is not raised, terrible things must happen – or the sham is exposed.

One must sympathize. But not too much, please.