If the Republicans seriously want to cause the U.S. to default by not raising the debt ceiling on October 17th, let them.
Let them spend the 10 days between now and then howling and raging about how awful it is that health insurance might soon become more affordable for millions of Americans. Let them roar about how programs like Social Security, Medicare, and Medicaid are destroying the country, despite the fact that most Americans like them. Let them scream, as they have every day since a Republican President left office, that our debt and deficits will soon obliterate us (never mind that the deficit is shrinking rapidly). And so on.
Let the Republicans finally persuade Wall Street that they are, in fact, so anti-American that they are willing to put their own extreme political views ahead of the country at large. Let them, in other words, finally trigger stock and bond market panics.
And then, a few minutes before midnight on October 17th, save the country.
Some people believe that, in an emergency situation, President Obama would have the legal right to raise the debt ceiling himself.
So, on the night of October 17th, if the Republicans really have driven the country off the cliff, President Obama should invoke the right that some people think he has… and raise the debt ceiling.
And he shouldn’t just raise it a trillion or two.
He should raise it far enough that the country can be spared this absurd charade for many years to come.
He should raise it to, say, $25 trillion — enough to carry the country well into the next Congress and Presidency (when, we can all hope, cooler and more responsible heads might prevail).
The next morning, as world markets breathe a massive collective sigh of relief and business gradually returns to usual (except for U.S. government business, which, by then, assuming the Republicans are still stabbing the shutdown dagger in the back of America, will be taking a real toll on the economy), President Obama can marshal a legal team to defend the decision he has just made.
Obama had better marshal one hell of a legal team if he follows Blodget’s idiotic advice, because if the president unilaterally blows the top off of the debt ceiling he will have committed a gross violation of the U.S. Constitution and impeachment proceedings would necessarily follow.
Market Ticker’s Ken Denninger ably addressed this last week by having a look at the 14th Amendment and what it says about debts and default. The pertinent parts of the 14th Amendment read as follows…
Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
Section 5. The Congress shall have power to enforce, by appropriate legislation, the provisions of this article.
That amendment was written to hold the federal government unaccountable for the debts of the Confederate states it was reabsorbing into the union, but it contains something very significant to modern times. Denninger explains…
First, what is a debt? A debt is evidenced by some instrument. In this case the instrument is a Treasury Bill, Note or Bond. Whether the old-fashioned style with coupons around the edge or whether newfangled and electronic, the debt of the United States must be evidenced by a formally-issued instrument.
No other item is a “debt.” A political promise is not a debt. Even a law that has been passed is not a debt. A law passed that has funds appropriated but which do not exist does not create a debt.
Only an actual issued Treasury Instrument is a debt.
Congress is given the power, explicitly to enforce all the provisions of this article (Amendment 14.)
So Congress has done so. In doing so Congress has passed legislation that limits the ability of the Treasury to issue debt to a specific maximum amount. Congress could also limit the composition (e.g. terms and types) of debt if it so decided, but it has not — that has been left to the discretion of Treasury.
The Executive has no authority to exceed that which Congress enabled, irrespective of what it may otherwise think.
However, The Executive is bound by The Constitution (and its Amendments) as is Congress.
Therefore, Treasury must pay the debts before all other bills, under The Constitution, as only the debts of the nation have preference as shown in The Constitution!
In fact there is no other place in The Constitution where preference is expressed for any particular appropriation. Further, Congress is well within its powers to authorize spending without a companion or attached revenue bill to raise the funds necessary (via taxes, imposts and excises.) There are plenty of examples where such an act might make sense (e.g. anticipated tax revenue that would exceed that originally expected, an accumulated Treasury surplus, etc.) but even if there are no funds Treasury isstill constrained by the debt limit unless Congress exempts it from same.
Treasury Secretary Lew has recently threatened that he will not prioritize payments of Treasury instruments and interest should there be no increase in the debt ceiling.
This act, were he to do so, would be a black-letter impeachable offense committed by both him and Obama as the chief of the Executive branch.
Interest on the federal debt comes to about $20 billion per month. The federal government takes in almost $250 billion per month. So long as the federal government continues to pay interest on the federal debt there is no default on its obligations and no reason for Blodget’s ridiculous market crisis to come to pass.
Failure to prioritize the federal government’s obligations, or failure to adhere to federal law as defined by the legal imposition of a limit on how much money the Treasury can issue in debentures, is a violation of Section 5 of the 14th Amendment and the legislation in place pursuant to it. As Denninger said, that’s a “black-letter impeachable offense.”
Blodget gives not a whit of thought to this fact, or to the fact that the president’s power to control the economy is limited by our basic laws. He wants what he wants, and those who disagree with him are extremists and extortionists who should be shut down and destroyed. And his advice to Obama is to do what it takes to win, regardless of what his legal authority actually is.
Which, at the end of the day, is a bright-line difference between the Left and the Right. The Right believes in limiting the power of the government along the lines set forth by the Founders in the Constitution, and the Left wants what it wants and doesn’t care about those limits.
It’s important to recognize this as this most pivotal month unfolds.