PAUL KRUGMAN N.Y TIMES
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So what are the choices if we do hit the ceiling? As you might guess, they’re all bad, so the question is which bad choice would do the least harm.
Now, the administration insists that there are no choices, that if we hit the debt limit the U.S. government will go into general default. Many people, even those sympathetic to the administration, suspect that this is simply what officials have to say at this point, that they can’t give Republicans any excuse to downplay the seriousness of what they’re doing. But suppose that it’s true. What would a general default look like?
A report last year from the Treasury Department suggested that hitting the debt ceiling would lead to a “delayed payment regime”: bills, including bills for interest due on federal debt, would be paid in the order received, as cash became available. Since the bills coming in each day would exceed cash receipts, this would mean falling further and further behind. And this could create an immediate financial crisis, because U.S. debt — heretofore considered the ultimate safe asset — would be reclassified as an asset in default, possibly forcing financial institutions to sell off their U.S. bonds and seek other forms of collateral.
That’s a scary prospect. So many people — especially, but not only, Republican-leaning economists — have suggested that the Treasury Department could instead “prioritize”: It could pay off bonds in full, so that the whole burden of the cash shortage fell on other things. And by “other things,” we largely mean Social Security, Medicare, and Medicaid, which account for the majority of federal spending other than defense and interest.
Some advocates of prioritization seem to believe that everything will be O.K. as long as we keep making our interest payments. Let me give four reasons they’re wrong.
First, the U.S. government would still be going into default, failing to meet its legal obligations to pay. You may say that things like Social Security checks aren’t the same as interest due on bonds because Congress can’t repudiate debt, but it can, if it chooses, pass a law reducing benefits. But Congress hasn’t passed such a law, and until or unless it does, Social Security benefits have the same inviolable legal status as payments to investors.
Second, prioritizing interest payments would reinforce the terrible precedent we set after the 2008 crisis, when Wall Street was bailed out but distressed workers and homeowners got little or nothing. We would, once again, be signaling that the financial industry gets special treatment because it can threaten to shut down the economy if it doesn’t.
Third, the spending cuts would create great hardship if they go on for any length of time. Think Medicare recipients turned away from hospitals because the government isn’t paying claims.
Finally, while prioritizing might avoid an immediate financial crisis, it would still have devastating economic effects. We’d be looking at an immediate spending cut roughly comparable to the plunge in housing investment after the bubble burst, a plunge that was the most important cause of the Great Recession of 2007-9. That by itself would surely be enough to push us into recession.
And it wouldn’t end there. As the U.S. economy went into recession, tax receipts would fall sharply, and the government, unable to borrow, would be forced into a second round of spending cuts, worsening the economic downturn, reducing receipts even more, and so on. So even if we avoid a Lehman Brothers-style financial meltdown, we could still be looking at a slump worse than the Great Recession.
So are there any other choices? Many legal experts think there is another option: [see below] One way or another, the president could simply choose to defy Congress and ignore the debt ceiling.
Wouldn’t this be breaking the law? Maybe, maybe not — opinions differ. But not making good on federal obligations is also breaking the law. And if House Republicans are pushing the president into a situation where he must break the law no matter what he does, why not choose the version that hurts America least?
There would, of course, be an uproar, and probably many legal challenges — although if I were a Republican, I’d worry about, in effect, filing suit to stop the government from paying seniors’ hospital bills. Still, as I said, there are no good choices here.
So what will happen if and when we hit the debt ceiling? Let’s hope we don’t find out.
SEAN WILENTZ POLITICO
Make no mistake: Although the United States may well be headed for a catastrophic economic crisis, we are already in a monumental political and constitutional crisis. As a historical matter, were the House Republicans to push the country into the abyss, they would be creating a situation analogous in the past only to the nullification crisis of 1832 and the secession crisis of 1860-1. The emergency is that grave.
So what should President Obama do? First, he must make the self-evident case that if the Republicans go through with their threat to take the country over the fiscal cliff, they will have violated the 14th Amendment of the Constitution that states: “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.” Explaining that the Republicans propose to act unconstitutionally would immensely strengthen his position in this emergency no matter what. He needs to make the argument loudly and clearly, without the lawyerly diffidence he has displayed.
The burden in this crisis rests entirely with the congressional Republicans who have precipitated it. If they were to violate the Constitution, it would be their fault, not the president’s. The president needs to make that argument as well – crisply and loudly.
On Oct. 8, the New York Times published my op-ed arguing for the president to declare that the Republicans would be violating the Constitution, specifically the 14th Amendment, if they refused to approve the debt limit bill, and that their abdication would demand that the president exercise his emergency power to end the crisis.
Text Fourteenth Amendment:
Section 1. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws. Section 2. Representatives shall be apportioned among the several States according to their respective numbers, counting the whole number of persons in each State, excluding Indians not taxed. But when the right to vote at any election for the choice of electors for President and Vice President of the United States, Representatives in Congress, the Executive and Judicial officers of a State, or the members of the Legislature thereof, is denied to any of the male inhabitants of such State, being twenty-one years of age, and citizens of the United States, or in any way abridged, except for participation in rebellion, or other crime, the basis of representation therein shall be reduced in the proportion which the number of such male citizens shall bear to the whole number of male citizens twenty-one years of age in such State.
Section 3. No person shall be a Senator or Representative in Congress, or elector of President and Vice President, or hold any office, civil or military, under the United States, or under any State, who, having previously taken an oath, as a member of Congress, or as an officer of the United States, or as a member of any State legislature, or as an executive or judicial officer of any State, to support the Constitution of the United States, shall have engaged in insurrection or rebellion against the same, or given aid or comfort to the enemies thereof. But Congress may, by a vote of two-thirds of each House, remove such disability.
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 same day, President Obama was questioned in a news conference about these points. He rejected using the 14th Amendment in any way because expert opinion is divided about it. “If you start having a situation in which there’s legal controversy about the U.S. Treasury’s authority to issue debt, the damage will have been done even if that were constitutional, because people wouldn’t be sure,” Obama said. “It’d be tied up in litigation for a long time. That’s going to make people nervous. There’s no magic bullet here.”
His statement presumes a consensus among legal scholars that will never occur. They are as polarized as the country. Surely the president encountered the conservative ideologues of the Federalist Society when he was editor of the Harvard Law Review. By failing to make the case that the Republicans would be more than irresponsible but indeed unconstitutional, he deprives himself of his strongest argument and his only means of preventing a national disaster. He also does his own disservice to the Constitution that he is sworn to preserve, protect, and defend.
In the event that the House Republicans were to act unconstitutionally and to put the country in an unprecedented catastrophic situation, the president is not a potted plant. To say otherwise is mere legal pettifoggery. Nor should it be assumed that the Constitution is a static document that prevents any remedy in the event of emergency. The tradition of standing on presidential power goes back to President Thomas Jefferson. That tradition holds that the Constitution is not, as Associate Justice Robert Jackson once observed, “a suicide pact.”
“A strict observance of the written laws is doubtless one of the high duties of a good citizen,” Jefferson wrote in 1810, “but it is not the highest. The laws of necessity, of self-preservation, of saving our country when in danger, are of higher obligation. To lose our country by a scrupulous adherence to written law, would be to lose the law itself, with life, liberty, property and all those who are enjoying them with us; thus absurdly sacrificing the end to the means.” (Jefferson’s emphasis.)
Jefferson was hardly alone. Presidents Andrew Jackson and Abraham Lincoln believed that the Constitution provided power to the executive in a national crisis to save the Union.
Before the Civil War, President James Buchanan argued at great length to the contrary. Those who say that President Obama is prevented from doing anything echo Buchanan’s arguments for passivity. They are upholding the long-disgraced Buchanan tradition. These are Buchanan’s words, stated soon after South Carolina seceded in 1860:
Apart from the execution of the laws, so far as this may be practicable, the Executive has no authority to decide what shall be the relations between the Federal Government and South Carolina. He has been invested with no such discretion. He possesses no power to change the relations heretofore existing between them, much less to acknowledge the independence of that State. This would be to invest a mere executive officer with the power of recognizing the dissolution of the confederacy among our thirty-three sovereign States.”
Lincoln thought differently.
If the Republicans decide not the raise the debt ceiling, the solution to the political and constitutional crisis is clear. By his constitutionally dictated oath of office, the president is required to preserve, protect, and defend the Constitution of the United States. By defaulting on America’s public debt, the Republicans will have attacked the Constitution, giving the president no choice. If he fails to act by invoking emergency powers, based on his constitutional oath of office, and raise the debt ceiling, he will have violated that oath.
Claims by our modern-day James Buchanans that bonds issued as a result of such executive action would be shrouded in uncertainty and therefore worthless are pure speculation, based not in fact but on mere projections. The law professors and pundits who have claimed as much are in no position to know. They have not, for example, consulted the finance ministries of China, Japan, or Germany on whether they wish to accede to the collapse of the world economy. Their conjecture is not, in any event, either a legal or historical judgment.
Still others in the Buchanan tradition contend that there are no enumerated powers in the Constitution for the president to act in such a national emergency. This is precisely the position Buchanan articulated:
“The question fairly stated is, has the Constitution delegated to Congress the power to coerce a State into submission which is attempting to withdraw or has actually withdrawn from the Confederacy? …After much serious reflection I have arrived at the conclusion that no such power has been delegated to Congress or to any other department of the Federal Government. It is manifest upon an inspection of the Constitution that this is not among the specific and enumerated powers granted to Congress, and it is equally apparent that its exercise is not ‘necessary and proper for carrying into execution’ any one of these powers.”
Lincoln rejected this line of passive thought. The ultimate provision in the Constitution that provides for presidential action is the oath of office itself, enumerated in the Constitution. If the current Congress willfully violates the Constitution, an act of unarmed rebellion and insurrection, it will create a vacuum that must be filled by executive action to prevent the nation’s ruin. With Congress’s abdication, its rebellion against the Constitution, the president could theoretically also invoke another constitutional provision. Obama, for wholly political reasons, should not raise it. Nonetheless, it is there, and it should be publicly discussed. That provision stipulates that the president must act to suppress insurrection. It is in the Constitution as clear as a bell. Lincoln in fact had arrested the elected members of the state legislature of Maryland on these grounds.
Those who criticized Jackson and Lincoln accused them of being merely political and denounced them as tyrants. But Jackson and Lincoln felt compelled by necessity and their oath of office to preserve the nation. Lincoln kept Jackson’s Proclamation on Nullification on his desk throughout the secession crisis. Perhaps Obama, a Lincoln acolyte, might read the words his predecessor used as his blueprint. If he wishes to go down in history as a Lincoln and not a Buchanan, Obama owes the nation and the Constitution nothing less.