Strengthening Constitutional Self-Government

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The Debt Ceiling

With less than a month ago until the United States of America reaches its debt ceiling, lawmakers are scrambling to address the crisis. President Obama is addressing it by comparing Members of Congress to schoolgirls and complaining about the rich being rich, Congressional Democrats are screaming about the impending doomsday, and Congressional Republicans are sticking to the "Just Say No to Taxes" mantra (for now). Meanwhile, the Obama Administration and some intellectuals are looking into the silly notion that the 14th Amendment allows the president to do whatever he wants to ensure that the public debt of the United States is not defaulted on. This follows an even worse vein of logic than the "I don't need to talk to Congress about Libya because dropping bombs on human beings is not being hostile" argument of late.

Apart from the idea that the 14th Amendment allows the Executive Branch to bypass the Legislative Branch's power of the purse being totally ridiculous, the United States is fully capable of paying off the interest on its debt if we needed to. As the Washington Examiner points out, defaulting would be a purely political choice. We would have the money to pay our interest payments if it came down to it; the debt ceiling just means that the government cannot accumulate anymore debt. By the law of the 14th Amendment, the President would be forced to pay off the interest on our debt with the monies regularly collected by the Treasury Department; he is not legally allowed to let us default on the debt if those funds exist. However, this would mean an instant end to almost all programs and offices of the federal government in order to pay our interest on the loans. We have the money to pay our interest, but then President Obama would have to choose between things like paying senior citizens their social security checks or paying for dropping bombs on the people in the not-war of Libya. We will not go into default if we hit the debt ceiling; the federal government would just stop most of its work.

And make no mistake on the severity of hitting the debt ceiling. Some people think it will be like when the government cannot pass a budget, as in the 1990s and as was recently threatened earlier this year-- this is false. In those instances, only nonessential parts of the federal government stop working immediately. If we hit the debt ceiling, everything stops. The FBI, the military, the TSA, Social Security, Medicare, the courts, federal prisons, IRS refunds, and every single employee of the federal government would instantly be forbidden from working. We will have $306 billion in expenses for the month of August, and only $172 billion in revenue. That means $134 billion worth of government programs and offices would instantly need to be shut down-- and not just tiny ones, but major services that Americans are now used to. If we hit the ceiling, then come August 3rd we will have an instantly balanced budget by the pure fact that we have no choice but to just lay off millions of federal employees.

These discussions on the debt ceiling are important, and they merit our close attention. Whatever the outcome on August 2nd may very well decide who will have power after 2012, and may have other far-reaching implications. I have a feeling that the Republicans will likely blink first in this fight (that is, probably agreeing to modest tax increases or the ending of some tax cuts), but not after continuing to advance their cause for fiscal discipline as much as they possibly can. While I am sure there are many out there and even those among the Tea Party Caucus in Congress that would like to force the Obama Administration to implement unparalleled cuts to the federal government, I just don't think that Speaker Boehner and many of the other Republicans are going to let it get that far. It's certainly a possibility, and would certainly change everything, but I just think it is unlikely at this point. We should watch closely just to make sure.
Categories > Congress

Discussions - 1 Comment

The GOP is going to fold like a Chinese lawn chair. We've got 2 more weeks of noisy arguments jammed with posturing, but they will never alllow this level of disruption.

It'll certainly be interesting to see market reaction to the temporary resolution, though. Don't know if PMs will panic or be calmed by the debt ceiling being raised, but the reaction could be significant, 10%-20%

It would certainly be wise to be postured to 'buy' on short notice if it does go down, because none of the fundamental issues are going to be resolved, and we *will* eventually default on this debt.

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