The Confederate States of America borrowed money to wage their insurrection. When they surrendered at Appomattox, the United States of America (the Union) had to decide whether or not to honor the Confederacy’s debts. Failing to do so would make lenders upset and possibly cause them to be less willing to loan money to America in the future. The decision was made not to honor the Confederacy’s debts, but to soften the blow to creditors a clause was added to the 14th Amendment that said, “The validity of the public debt of the United States shall not be questioned.”
As Kristen Roberts points out, the meaning of those words were less ambiguous at the time than they may seem today.
Then, as now, this promise written into the Constitution offered creditors confidence that lending to America – indeed, investing in America – would be safe.
“Every man who has property in the public funds will feel safer when he sees that the national debt is withdrawn from the power of a Congress to repudiate it and placed under the guardianship of the Constitution than he would feel if it were left at loose ends and subject to the varying majorities which may arise in Congress,” argued Sen. Benjamin Wade, a Republican supporter of the amendment.
If there is any true ambiguity it is in the fact that the debt ceiling is a limitation on the Treasury Department’s ability to have new auctions for bonds. One way of looking at this is that the auction is the issuance of new debt, not the honoring of old debt. Looked at in that light, you can argue that refusing to create new debt obligations in the form of bond contracts doesn’t violate the 14th Amendment because the 14th Amendment only refers to already existing debt.
But this is a very stupid way of looking at our credit. Simply put, selling new treasury bonds is how we pay our debt. A failure to hold new auctions is the exact same thing as not honoring the validity of our debt. It’s like saying that you can’t pay your electricity bill with a credit card because you aren’t authorized to incur more debt from Visa. But, if the Constitution says that you absolutely have to pay your electricity bill, then that is the end of the story. You must figure out a way to pay that bill.
Likewise, you cannot say that you recognize the validity of your debt to the power company but that you simply aren’t going to pay the bill. Failing to pay is the same thing as failing to recognize the validity of the debt.
If the debt ceiling has any useful purpose, it is to make it painful for the country to increase its deficit spending. This pain thereby puts a brake on how much debt we can incur. But that is really all the debt ceiling does. It creates a hassle. We might think this hassle is an important safeguard, but it isn’t a constitutional principle.
The constitutional principle here is that we must pay our debts no matter how painful it might be to do so.
So, the onus should be on Congress, not the president, to follow the Constitution. They are, after all, the only ones authorized to spend money.
I remember the days when voting to raise the debt ceiling was an onerous chore the majority party did out of tradition. And they did it as quietly as possible.
I’ve come to think that Tea Partiers don’t have enough drama in their everyday lives, and that’s why they’ve turned Congress into a soap opera.
Let’s be clear that from the point of view of the folks who financed this crisis–and Ed Meese is not usually thought of as outside the GOP mainstream–the matter of legality is secondary. It is a deliberate strategy to create a Constitutional crisis, present the President with a Hobson’s Choice, and then punish the President regardless of the choice he takes to preserve the US government, with the vague hope of nullifying the 2012 election.
The Congress does have an obligation under the 14th Amendment of the Constitution. But who is going to compel the Republicans to honor that obligation?
And we should stop thinking that this is a Tea Party maneuver. It is clear that the Republicans in both the House and Senate are unified behind this strategy and that any “moderation” has really been feints to probe Democratic caucus weaknesses (thanks Mike McIntyre and friends).
It is also clear that Harry Reid should be thinking about using the nuclear option on the filibuster in order to prevent default.
The lawyers, economists, financial market experts, political analysts have all discussed this over and over. And it comes down to what the President can politically get away with that will be popular with a huge mass of the public–regardless of the legal consequences. So far that public sentiment is on paying what we’ve already obligated and tightening belts. As long at the public is still stuck on austerity, even without a default we will be killing the economy.
Unfortunately, the President after four years of deficit-debt rhetoric likely cannot pivot out of that position.
The more I hear the Republicans and their giddiness, the more I think we’re headed for a big political catastrophe.
Yes, for all the rosy and optimistic thinking I have seen, and pronouncements that once the GOP has their primal scream moment they will suck it up and do the right thing; I’m afraid the reality is that, yes, it is plainly obvious that they are perfectly content to burn down the house with every one of us in it. I really don’t think any of this is a bluff. The momentum has been allowed to grow to the point that it likely cannot be stopped by those who have initiated this.
And, of course, the catastrophe is going to be much more than political. The entire economy and the government is all poised to be flushed down the toilet in the next 30 days. And it will be on purpose. They want to force an historic Presidential action that they can use to erase the Obama presidency from the face of the earth. The reality is that right now, we are in a civil war. It’s just that the actual bullets and guns have not yet been brought out.
All true, but I don’t think 14th Amendment arguments are really meant to persuade the Tea Party. At some point here pretty soon the president is going to have to defy Congress, and we want to minimize the fallout. You can assume blind obstruction from the Republicans, but you also have to make a case to the rest of the world for how you’re going to deal with them.
Of course, the catastrophe may already have gathered too much momentum to reverse at this point. In that case I would just note that we’ve beat these fuckers before, and we’ll beat them again.
I agree on the civil war statement. Or perhaps it could be more accurately described as a coup. The problem is the majority of the population is apathetic and numb and seems to think this is all happening on TV and not in real life.
I do believe the stock market will continue to take a massive dive in the next few days (although it’s curiously up right now), and that the reality of the disaster will start to really sink in for the so-called-moderates. Remember, they are of the moneyed classes that will be hurt the most. If they are facing losing their seats AND losing all their money, you don’t think they’re going to sign that discharge petition?
what is your basis for writing that the majority of the population is apathetic? and thinks this is not happening in real life?
Have you been outside lately? Seen any big protests? My local news led last night with a cute story of a dennis the menace kid who managed to score himself a flight to vegas from our airport. The only people making a stink out here are federal employees. When I try to talk to my coworkers about it, they laugh it off.
The only reason the republicans even have an office in this country above dogcatcher is because the majority of americans are apathetic. Apathy is a major feature of american culture. We’re not the only country with this problem, but Americans are spoiled – we’ve lived in a relatively stable, peaceful country for a long time now, and we don’t know what a crisis looks like if it hits us on the head.
Frankly, I find it odd anyone would disagree with that. There are plenty of active americans posting on blogs like this, but most people are simply not politically involved. Maybe I know this because I live in Michele bachmann’s district, and not in some highly politically active enclave. My neighbors put their quality time into Hot Dish.
My wife works for a large financial services company. She came home last week and was telling about one of the executives who was complaining at lunch about “Obama shutting down the government”. My wife told her, “I think you can mostly blame Ted Cruz for the shutdown.” The exec looked at my wife and said, “Who’s he?” My wife was floored, to say the least.
Just one story. But probably pretty representative.
There are many reasons USA citizens are uninformed and misinformed, but writing the large percentage of us off as apathetic is dismissive and disrespectful of the issues most USAians face in their daily lives. Most people face insecurities (economic, health and food and losing their homes) and ppl are kind of on their own to deal with this unless they belong to a supportive community of some kind. The ACA is going to make a big difference.
Protests don’t mean anything – if you are comparing with the 60’s, now that was a time of prosperity, students didn’t have to work 2 jobs to afford college. jobs provided benefits and security, ppl could change jobs without catastrophic consequences.
There are lots of problems we must address, let’s not start by writing off the real problems most of our citizens are facing.
The electric bill analogy is good. I would have gone with Boehner having a big going away party for his integrity and then finding out his credit cards were already maxed out among the beltway’s pubs and bars. But the electrical bill analogy is better.
The debt ceiling barrier is a vestigial organ from a different time and circumstance. It needs to be removed. In recent decades it’s been a wonderful chance for Congressional posturing but it’s obviously too dangerous. There are also too many other superfluous “veto points” in the rules of Congress.
The Republicans were perfectly willing to fill-out any number of credit card applications for Reagan and W, and send them in.
But now that a Schwartza’s in office, all future debts must be paid in advance.
Sheryl Gay Stolberg, New York Times: Kochs Deny Pushing for Shutdown Over Health Law
Blaming story on Harry Reid, the two little weasels.
The Confederate States of America borrowed money to wage their insurrection. When they surrendered at Appomattox, the United States of America (the Union) had to decide whether or not to honor the Confederacy’s debts. Failing to do so would make lenders upset and possibly cause them to be less willing to loan money to America in the future.
I don’t get the last part. The U.S. government didn’t borrow the money. A bunch of traitors did. Robert E. Lee, Alexander Stephens and Jefferson Davis(among others) should have been stuck with paying it back, if anything.
No,the US borrowed money too. Wars are extremely expensive. So the point is that debts in the name of the United States will be honored, but debts in the name of the Confederate States are worthless.
Look at it this way. You lend money to people in Georgia and then the federal government assumes and dissolves that debt. Do you invest in Georgia again? The Confederacy was half the country at that time. And their bills were not being paid. That angered a lot of people that we wanted to continue to lend us money. We had to assure them that the default was a one-time deal.
And if Rick Perry actually decided to follow through with his deluded fantasies? Does anyone on Wall Street really think we’d be obligated to pay off Texas’s debts incurred in such a thing?
Historically, there’s an even more basic argument you can make. One of the main reasons for adopting the Constitution in the first place was to enable the United States to pay its debts from the war. That’s why the first two powers granted to Congress are to lay and collect taxes etc. etc. and to borrow money on the credit of the United States. The country really was broke at in the 1780s, and it wasn’t going to survive as a collection of mostly autonomous states that refused to pay their share for the common good.
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