Thursday, December 27, 2012

A toast to debt ceiling eve.

It turns out that the debt ceiling debacle will coincide with the fiscal cliff debacle, to create a perfect fiscal storm to start the new year.  We will reach the debt ceiling on New Year’s Eve.  

For those new to this topic, here's the short version: Congress has enacted a ceiling on our national debt, and Congress has also passed budgets and tax laws that imply that the Treasury must violate that ceiling to pay for all the things that Congress has required the government to do.  That debt ceiling will be reached on New Year's Eve, and if Congress does not raise the debt ceiling by that date the federal government will not be allowed, under the law, to pay any more of its bills than current revenues will support: it will have to simply default on some of the financial obligations that Congress has enacted.   At least that's been the interpretation for a long time now.

Note to the Republican Party: come back to Earth.  I say this as a concerned American.  I’m not always with you on issues---ok, to be honest I’m very rarely with you on issues.  But I’m very much in favor of continuing to have at least two sensible, viable parties in this country, and you, the Republican Party, are in real jeopardy right now; you are about to do something very, very foolish. Seriously.  If your plan is to try to use the debt ceiling as a bargaining tool, find a different plan. You can’t really expect to gain friends and influence people by holding our national honor hostage to your whims. Yes, the debt ceiling drama will be carried out over a couple of months as the Treasury twists itself silly around “extraordinary measures” to avoid complete financial collapse, so even thought the ceiling itself is reached in a few days the drama can be teased out for some time to come.  But I mean, what is the negotiating theory here?  That this gives Republicans some kind of leverage because Republicans don’t really care whether the United States defaults on its debts but Democrats do?  It comes very close to treason, frankly, which is not the kind of image that is likely to make a national party grow. 

And of course, as I’ve said here before, the whole concept of a debt ceiling makes no sense.  Congress passes all the bills that create national deficits; it creates the tax laws that provide revenue, and it passes every single line of every single budget---in fact, it hast to pass those lines twice, in a sense, once to authorize an expenditure, and a second time to appropriate funds to expend.  Let me repeat that last phrase: Congress has already voted to expend these funds.  The debt ceiling vote is to determine whether Congress intends to pay the bills for the budget expenditures it has already agreed to make, and which it has already legally appropriated the funds to make.

The Fourteenth Amendment, section 4, says that “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.”  I don’t want to get into the issue of whether the existence of a debt ceiling is itself unconstitutional once the budgets that require the Treasury to violate that ceiling have passed through Congress, although I thought that Lawrence Tribe’s arguments against that interpretation were intellectually vacuous.   Still, I’ll leave that issue to lawyers, I have no expertise there.  But whether or not a debt ceiling vote violates the Fourteenth Amendment in a technical legal sense, it certainly violates its spirit.  Congress enacts an obligation for the federal government to pay for every line item in the budgets it passes.  If Congress, and particularly the Republicans in Congress (because no one else is suggesting that there will be a contest over passage of the debt ceiling bill), refuse to allow the Treasury to borrow money to meet that obligation, then Congress must either find an alternative way to make those payments, or it is very explicitly stating that the public obligations of the United States are not valid, and that Congress has no intention to pay them.   

Now, there are only three methods that I know about to raise money to pay our national bills.  We can borrow it, we can raise it through increased taxes, or we can print it.  If the Republicans in Congress do not intend to invalidate the nation’s public obligations, and if they refuse to allow the Treasury to take the first option, then they must pick from the other two.

Which will it be?

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