As the squawking parrots in Washington rhythmically emitted their immutable sounds, as the debt ceiling caw-cusses in the House went nowhere fast, it’s time to consider a few realities that may have been overlooked if Congress doesn’t vote for the McConnell/Obama compromise worked out on Sunday:
1. August 2nd is hardly fixed and precise as the drop dead date. That was a good faith estimate, but there may be a few additional days left in the system: “‘They can go a little bit beyond Tuesday, but once we’re into the second half of August … then we’re in serious trouble,’ said Nancy Vanden Houten, senior analyst at Stone & McCarthy Research Associates in Princeton, N.J… She projected the government would be able to survive until Aug. 15, when $41 billion in payments are due, including $29 billion in interest on government securities. At that point, the Treasury would come up short, Vanden Houten said… But the exact date on which the nation’s bills will exceed its cash balance remains a moving target, analysts said. It depends on the unpredictable flow of tax revenues into the government's coffers and financial juggling by Treasury officials.” Los Angeles Times, July 29th.
2. While the President and his legal staff have not found solace in this argument (recommended to Mr. Obama by former President Bill Clinton), there is a Constitutional basis in the Fourteenth Amendment for a unilateral action by the President to raise the debt ceiling without Congress, and if Congress doesn’t move, like it or not, Obama may be forced to find out if the provision works (or at least stall the issue while the courts decide): “At issue is this provision [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.’” The sentence was intended to ensure the payment of Union debt after the Civil War [for example, if the South had won, they were expected to reneg on Civil War debts], though it was more broadly written…” ABA Journal, July 25th. “‘I have talked to my lawyers,’ Mr. Obama said. ‘They are not persuaded that that is a winning argument.’ … Adding another element of uncertainty, and possible court battles, to the debate do not seem to appeal to the White House. And it is, in any event, not clear that the nation’s creditors would continue to lend money to the United States were the president to take unilateral action…In recent weeks, law professors have been trying to puzzle out the meaning and relevance of the provision . Some have joined Mr. Clinton in saying it allows Mr. Obama to ignore the debt ceiling. Others say it applies only to Congress and only to outright default on existing debts. Still others say the president may do what he wants in an emergency, with or without the authority of the 14th Amendment.” New York Times, July 24th.
Whatever the band aid, a permanent solution is mandatory. The lack of a willingness to compromise despite a massive popular groundswell for middle ground may indeed destroy the political careers of the intransigents – in 2012 – but the country and its people will face higher costs in almost every category if we hit that ceiling and lose our credit rating (which may happen anyway if there is only a short-term solution, since the ratings agencies are concerned about the seeming inability of our government to work together). While we probably won’t technically default on the bonds we’ve issued (we might, but tax dollars are constantly flowing in; it’s a question of priorities), there won’t be any new ones issued and as I have blogged before, about $135 billion will fall out of our economy very quickly. Whatever the mega-rich have gained in tax cuts, they, like the rest of us, will lose in high debt and other costs across the board (maybe they’re moving out of dollars and into ???). Maybe we should stop paying members of Congress and their staffs until they do work out a permanent solution… Oh, they have to vote on that.
As noted above, they tell us that Senate Minority Leader, Republican Mitch McConnell and the President really worked out a package that the children in the House of Representatives will vote for. We’ll see…. Let’s hope so or let’s take away their allowance!
I’m Peter Dekom, and whatever the result, the 2012 elections may be among the most “memorable” in our nation’s history… if the voters still remember!