More on the Debt Limit
This Hill article was up on Naked Capitalism’s Links this morning. More of the Democrats urging extreme caution in pursuing the 14th Amendment as a solution to a debt limit which is an agreement between parties and not a requirement. One could always print more money to resolve the issue also. Meanwhile, citizens having little political power presently are being held hostage and ultimately will pay a price.
14th Amendment talk on debt limit viewed with extreme caution by Team Biden, The Hill, Brett Samuels and Rebecca Beitsch.
President Biden and his team are approaching the prospect of a debt ceiling escape hatch that hinges on the 14th Amendment with extreme caution ahead of a pivotal meeting with congressional leaders at the White House on Tuesday.
Some officials have openly voiced concerns about the legal standing of using the 14th Amendment to solve the debt crisis and the potential financial ripple effects of going that route.
There is also a desire to avoid undercutting talks with lawmakers on either a short- or long-term deal on the debt ceiling by vowing to go around Congress.
While not entirely ruling it out, Biden and other senior officials are hardly embracing the idea, which revolves around language in the 14th Amendment that says the public debt “shall not be questioned.”
The idea of using that language to allow Biden to unilaterally continue to issue debt has reportedly been floated privately within the administration.
Treasury Secretary Janet Yellen on Sunday, however, said using the 14th Amendment would trigger a constitutional crisis. She argued lawmakers should not let it get to that point. Yellen said on ABC.
“There is no way to protect our financial system and our economy other than Congress doing its job and raising the debt ceiling and enabling us to pay our bills. And we should not get to the point where we need to consider whether the president can go on issuing debt. This would be a constitutional crisis.”
AB: Is there somewhere in the constitution or an amendment discussing the violation of a debt limit? This seems like theater to me.
Yellen would not explicitly say the idea was not being considered but described it as “one of the not good options” if Congress fails to act.
Biden was asked in an MSNBC interview last Friday about using the 14th Amendment and said,
“I’ve not gotten there yet.”
The president has previously expressed opposition to changes to the traditional debt ceiling process. Asked last October about abolishing the debt ceiling entirely, Biden called the idea “irresponsible.”
Talk of whether the debt limit is constitutional under the 14th Amendment — which generally deals with citizenship and was added to the Constitution after the Civil War — has heated up inside the Beltway as concerns that the U.S. could default grow increasingly urgent.
Yellen has warned lawmakers the U.S. could breach the debt limit by early June, meaning the country would default if Congress does not act. A default would lead to increased interest rates, the potential loss of jobs, a likely drop in the stock market and delayed Social Security payments, among other consequences.
AB: There are options. Stamp out a large copper penny to represent the debt is backed by something. The coin is just symbolic. Print more green-backs based on the backing of a coin. (what a relief, the dollar is backed by something). Or just go ahead and print the money under the full faith and credit of the US. The US dollar is still the currency of global exchange. Many countries will thank you for cheaper dollars and we will experience inflation.
There are some administration allies who see the 14th Amendment as a potential way out of an impending crisis should Congress fail to act, but one that is not without its own consequences.
Mark Zandi, the chief economist at Moody’s Analytics who is often cited by Biden administration officials, told senators in March that a 14th Amendment declaration “seems the most viable option” if the nation is about to breach the debt limit. Zandi said in testimony before a Senate subcommittee on economic policy . . .
“Investors would rightly wonder if using the 14th Amendment to abrogate the debt limit law would stand up in the courts, and even if so, what it means for our political system’s checks and balances. Given the constitutional crisis this would set off, financial markets would still be roiled, and a recession would ensue.”
AB: Hmmm, Powell is not an economist and Zandi does not appear to be an attorney. ?
Administration officials are likely to be particularly sensitive about discussing a way to work around Congress entirely ahead of Tuesday’s meeting among Biden, Speaker Kevin McCarthy (R-Calif.), House Minority Leader Hakeem Jeffries (D-N.Y.), Senate Majority Leader Charles Schumer (D-N.Y.) and Senate Minority Leader Mitch McConnell (R-Ky.).
For Biden to invoke the power would almost certainly spark litigation, but the debt ceiling itself is now also facing a legal challenge.
A lawsuit from the National Association of Government Employees contends the debt ceiling is unconstitutional because if the limit is reached, Yellen would be forced to decide which payments to prioritize, violating the separation of powers by taking over Congress’s spending authority.
The White House on Tuesday declined to comment on the lawsuit.
While some legal scholars have promoted the 14th Amendment as a way to sidestep the debt ceiling, many caution such a move may not be legal.
Anita Krishnakumar, a professor at Georgetown Law, said the Constitution under Article 1 gives Congress the power to pay debts and “borrow money on the credit of the United States.”
In 1917 Congress refined that process, giving the Treasury secretary the power to borrow money up to a certain amount without lawmakers’ approval, but the authority to borrow money still rests with Congress itself, she said.
“Just because we think it would violate the public debt clause not to pay the interest on our loan applications, for example, doesn’t mean that you can violate another provision of the Constitution in order to do that,” Krishnakumar said.
“If and when the Congress in some kind of political gamesmanship decides not to increase the debt unless it gets some concessions from the president — and that act could cause us potentially to not pay our public debt — I don’t think that threat means that you can just ignore Article 1 Section 8, which gives Congress the power to borrow money.”
As battles over the debt ceiling become a more frequent occurrence, however, some who previously shot down the 14th Amendment prospect are now embracing it.
Harvard Law professor Laurence Tribe previously opposed the idea, but he said while overarching issues remain, “they are the wrong ones for us to be asking.”
“The right question is whether Congress — after passing the spending bills that created these debts in the first place — can invoke an arbitrary dollar limit to force the president and his administration to do its bidding,” he wrote in an op-ed in The New York Times.
“The president should remind Congress and the nation, ‘I’m bound by my oath to preserve and protect the Constitution to prevent the country from defaulting on its debts for the first time in our entire history.’”
How to end the debt ceiling stand-off democratically: set fiscal policy through elections, not hostage taking, Angry Bear, Eric Kramer
Deficits, Debt, Debt Subject to the Limit, Off Budget, Trust Fund: Building your 2013 Toolkit, Angry Bear, run75441
Social Security and the Debt Limit: the Basics Again, Angry Bear, Bruce Webb
The Democratic Party enabled this entirely foreseeable, and entirely avoidable, crisis by refusing to abolish the debt ceiling while they had control of Congress. Democratic hostility to reform is so deeply ingrained that the party would rather let the GOP burn down the world than accept the need for political change.
I don’t think they could have repealed the debt ceiling statute (filibuster). They have been criticized for not raising the debt ceiling under the statute while they had the majority although, again, there was that pesky filibuster.
Jack:
I asked a question of another authority who had answered in 2011 also. That will be up tomorrow. I still talk to him once and a while and let him know how Craig is doing. Heading up to Denver on Sunday to help Craig set up his apartment. If rates come down again, I think he will hunt for a house.
Agree with you Nobody and they did it because they thought the politics would aid them. I absolutely loathe today’s GOP, but there are a lot of Dems that I do not feel much better about. Our only hope on the debt ceiling is that the rich are going to lose a lot more than the average citizen. If I was Biden I would threaten to not spend another dime on border security in Texas and Florida and see how the GOP likes that.
well, Trump got away with spending money, not authorized by Congress, by taking it from Defense and spending it on his wall. he argued that the wall was defense.
surely the Democrats are as creative as that.
not ex cathedra: my impression is that the Dems are either spineless or in cahoots. or both. as for “the power to pay debts and borrow on the credit of the United States..” that does not give them the power to not pay debts or destroy the credit of the United States. it seems clear to me that the 14th, coming after the clause cited, informs that clause.
You got that right, it’s all theater. It shouldn’t be happening. Period
Mint the Damned Coin …
Here’s the latest on the debt ceiling.
NY Times – Just in
President Biden and Speaker Kevin McCarthy emerged from a critical meeting at the White House on Tuesday with no consensus on how to end their impasse over the federal debt and spending just weeks before the nation is set to default on its obligations for the first time in history.
With the American and perhaps the global economy hanging in the balance, the meeting was the first such session between the Democratic president and Republican speaker since February. But the two sides stuck close to their opening positions, with Mr. Biden demanding that Congress raise the debt ceiling unconditionally to avoid a default and Mr. McCarthy insisting that such a move be accompanied by serious spending restraints.
“I didn’t see any new movement,” Speaker Kevin McCarthy told reporters after the meeting. He said he asked Mr. Biden “numerous times” if there were places in the federal budget they could find “savings” — meaning cuts. “They wouldn’t give me any,” he said. That is consistent with what the White House has publicly said: Mr. Biden would not tie any cuts to raising the debt limit.
Senator Mitch McConnell, the minority leader, insisted that the United States would not default. “What we have here, is we’re running out of time,” Mr. McConnell said. Mr. McCarthy has suggested that a deal should be hammered out in the next two weeks to leave enough time for legislation to be passed.
For the Democrats, Senator Chuck Schumer, the majority leader, said that in the meeting, Mr. McCarthy refused to promise that the United States government would not default. …
President Biden is set to discuss the meeting and “preventing a first-ever government default” in remarks from the Roosevelt Room at 6:30 Eastern, according to White House pool reporters.
Nothing much came of this meeting. Mitch McConnell still says there will be no default. Biden & McCarthy are not not giving in. Biden is right to stand his ground. McCarthy is not going to win this round.
Unless he does, and then the country will lose, big time.
What Would Happen if Biden Ignores the Debt Ceiling and Calls McCarthy’s Bluff
NY Times – May 9
… Some Republicans, whether serious or bluffing, seem ready to go to the brink of default — if not actually default on the U.S. national debt. Debate has intensified over whether President Biden might sidestep the debt ceiling so the nation can keep paying what it owes.
There are powerful legal reasons and arguments for him to do so. These include the 14th Amendment, which prohibits questioning what we already owe, and the so-called later-in-time rule of statutory construction, which basically means that Congress’s most recent budget legislation trumps any earlier legislated ceiling.
Given the stakes, it’s important to explore the likely consequences if Mr. Biden ignores the debt ceiling — how doing so would affect our economy and the markets, our retirement savings and even our constitutional system. There is encouraging news for the president and those who follow our first Treasury secretary, Alexander Hamilton, in believing we must pay our legally incurred debts. We are far better off doing so, even if it means short-term chaos should Mr. Biden allow the June 1 deadline to come and go.
First, consider the consequences if the United States stopped paying its debts and defaulted on June 1. This would undo what Hamilton and his successors sought to ensure: a national credit rating beyond cavil or reproach. We would see a great tottering — if not worse — of U.S. banking, U.S. financial markets and the world’s capital markets.
For one thing, U.S. Treasury securities, valued at over $24 trillion (by far, the largest asset market in the world), are the primary safe asset held in banking, pension fund, mutual fund and other business portfolios. Our present regional bank crisis involving Silicon Valley Bank and others is occurring in response to a relatively slight, temporary drop in the value of low-yield Treasuries largely because of the Fed’s interest rate hikes. An outright default would leave us nostalgic for the comparable placidity of this troubled moment.
We would also probably see a rapid plunge in the value of the dollar worldwide as a global reserve asset. Our currency’s value in relation to others’ is rooted primarily in global demand for dollar-denominated financial assets, since we have relinquished our primacy as a goods exporter to China. Since Treasury securities are by far the most voluminous asset, their slide would be the dollar’s slide. This would quickly render imports, on which we continue to rely, far more expensive. Inflation could look more like that of Argentina or Russia 20 years ago than that of the present or even the 1970s. …
What Would Happen if Biden Ignores the Debt Ceiling and Calls McCarthy’s Bluff
NY Times – May 10
(Important op-ed. Maybe will get through moderation, maybe not.)
… Some Republicans, whether serious or bluffing, seem ready to go to the brink of default — if not actually default on the U.S. national debt. Debate has intensified over whether President Biden might sidestep the debt ceiling so the nation can keep paying what it owes.
There are powerful legal reasons and arguments for him to do so. These include the 14th Amendment, which prohibits questioning what we already owe, and the so-called later-in-time rule of statutory construction, which basically means that Congress’s most recent budget legislation trumps any earlier legislated ceiling. …
Given the stakes, it’s important to explore the likely consequences if Mr. Biden ignores the debt ceiling — how doing so would affect our economy and the markets, our retirement savings and even our constitutional system. There is encouraging news for the president and those who follow our first Treasury secretary, Alexander Hamilton, in believing we must pay our legally incurred debts. …
First, consider the consequences if the United States stopped paying its debts and defaulted on June 1. This would undo what Hamilton and his successors sought to ensure: a national credit rating beyond cavil or reproach. We would see a great tottering — if not worse — of U.S. banking, U.S. financial markets and the world’s capital markets.
For one thing, U.S. Treasury securities, valued at over $24 trillion (by far, the largest asset market in the world), are the primary safe asset held in banking, pension fund, mutual fund and other business portfolios. … An outright default would leave us nostalgic for the comparable placidity of this troubled moment.
We would also probably see a rapid plunge in the value of the dollar worldwide as a global reserve asset. Our currency’s value in relation to others’ is rooted primarily in global demand for dollar-denominated financial assets, since we have relinquished our primacy as a goods exporter to China. Since Treasury securities are by far the most voluminous asset, their slide would be the dollar’s slide. This would quickly render imports, on which we continue to rely, far more expensive. …
Finally, even the serious prospect of U.S. default would quickly raise debt-servicing costs, rendering our deficit larger than it currently is — a consequence dramatically at odds with Republicans’ professed concerns about tying the debt ceiling hike to massive budget cuts. …
It almost makes you think that fiscal responsibility isn’t what House Speaker Kevin McCarthy’s caucus really wants.
Now suppose the president decides to challenge or ignore the debt ceiling and instructs Ms. Yellen, on June 1 or before, to continue paying our nation’s obligations, as established by Congress in the most recent budget legislation, no matter what. Assume also that he and his administration carefully explain to the nation the legal and financial bases — not to mention the moral ones — for continuing to pay our debts.
The best-case scenario in this situation is that Mr. McCarthy’s caucus recognizes it has no legal case and its bluff has been called and that it gives up the tactic and passes budget legislation to which the Senate and the president can ultimately agree. This is unlikely but not impossible. After all, the only real alternative for Mr. McCarthy would be to go to court and seek to enjoin the president’s decision to continue to pay obligations — legal obligations already legislatively incurred. The impact of going to court to argue for defaulting on the nation’s debt, let alone the political optics for Mr. McCarthy, would be very risky. …
It’s also possible that Mr. McCarthy’s Republicans howl in protest and stage more hearings and votes on the budget in the House, taking us to the brink of June 1 before legislatively addressing the debt ceiling. But it’s hard to see this getting them anything other than impotent spectacle, further cementing their public image as unserious, especially if the president formally repudiates the debt ceiling now or this month, rather than waiting until June.
But suppose the Republicans take the president to court nonetheless. What then? Assuming the courts didn’t refuse to hear the case on justiciability grounds, the challenge would certainly receive expedited review, given the magnitude of the matter. During the brief time the issue was being litigated, we’d see the beginnings of some of the nightmare economic scenarios sketched above.
But only the beginnings. The president’s multiple arguments would be compelling, and the markets, in any case, are already pricing in worries of this sort. The prospect of an end to the too-often threatened fiscal terrorism that is debt ceiling gamesmanship, moreover, would surely be more welcome to the markets than would be continued hostage taking and associated uncertainty of the kind that Republicans now regularly impose on the nation and its creditors. …
… Will invoking the 14th Amendment amount to a constitutional crisis, as Ms. Yellen suggested this week? Not really. For one thing, as noted above, there are multiple grounds upon which Republican hostage taking on the debt ceiling is contrary to law, and not all of them implicate the Constitution. For another thing — and, in my view, yet more important — the present issue is not really a legal issue pitting the president against Congress.
The current debt ceiling nonsense is a case of one faction of Congress being pitted against Congress itself. Our legally contracted debt is congressionally legislated debt; refusal to pay on this debt boils down to the House Republican faction refusing to pay what Congress itself has mandated we pay. …
Dobbs
is this you? i think you are 100% right.
oh, seems to be the NY Times. it’s still right. But there are a few voices out there saying it’s all a stage show to cut spending without having to actually vote on it, and leaving the Dems to look like heroes while..cutting spending. “we couldn’t help it, those mean Republicans were going to desroy the economy.”
and of course raising taxes is off the table.
that’s what Bush2 told his committee to save social security…everything is on the table except raising taxes…. the dollar a week that is the only way to actually save social security for the purposes and people it was designed for.
but i digress.
Shall we put our faith in Mitch McConnell:
‘The US has never defaulted on its debt and never will.’
This seems ‘on the money; so to speak.
The current debt ceiling nonsense is a case of one faction of Congress being pitted against Congress itself. Our legally contracted debt is congressionally legislated debt; refusal to pay on this debt boils down to the House Republican faction refusing to pay what Congress itself has mandated we pay.
However, the way the faction in question seems to view the matter is this: “Sure, all of us Congressmen (er, most of us) vote for all manner of pork-related projects that will benefit our constituents and get us re-elected. BUT when it comes time to shell out the money, we only plan to do so on projects that benefit the GOP ‘Freedom Caucus’. So that’s what we’re going to do. There is no point, as far as we are concerned on getting members on the other side re-elected. Obviously.”
dobbs
re McConnell never will:
i think he meant the dems will fold.
The latest from McConnell is that he has no Secret Plan (to avoid default.)
So it was just wishful thinking.
Last best hope, gone.
Both sides are all in on the default issue.
There’ll be no resolution this year.
Chips will fall where they may.
Wait til 2024. Then we’ll see.
Yellen Calls Invoking 14th Amendment to Raise Debt Limit ‘Legally Questionable’
NY Times – May 11
Treasury Secretary Janet L. Yellen on Thursday downplayed the possibility that President Biden could essentially ignore the debt limit by invoking the 14th Amendment, calling the idea “legally questionable.” …
Mr. Biden is scheduled to meet with top congressional leaders again on Friday, after an initial meeting on Tuesday failed to elicit an agreement.
The brinkmanship has raised questions about whether the Biden administration can act on its own to raise the $31.4 trillion borrowing cap by relying on a clause in the 14th Amendment stating 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.” …
Powell urges lawmakers to raise the debt limit
Congress, Biden Administration Must Raise the Debt Limit, Powell Says
Barron’s – May 3
Federal Reserve Chairman Jerome Powell called on Congress and the White House to find a way to raise the federal government’s borrowing limit before a potential disaster, saying the central bank can’t protect the U.S. economy from a sovereign default.
“From our standpoint, it’s essential that the debt ceiling be raised in a timely way so that the U.S. government can pay all its bills when they’re due,” Powell said. “A failure to do that would be unprecedented, we’d be in uncharted territory and the consequences to the U.S. economy would be highly uncertain and could be quite averse.” …
2nd Amendment: A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.
14th Amendment (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.
(IMO, the 14th Amendment is at least as clear as the 2nd.)
And it also reinforces the ‘full faith & credit’ clause which appears in Article 4, Section 1, which may be even more significant.
Meanwhile, huge masses of impoverished masses yearning to breathe free await at our southern borders.
Yet another curse on US, being the richest country on earth situated just north of really poor, downtrodden people.
At least in the short run, we would be well-advised to make room for them.
Dobbs
make room
i agree with that. the short run will take care of the long run.
i have to say i am one of those who is afraid of excess immigration, not because of who they are, but because of how many they are. but we need to be humane and smart. and just possibly remember that “we” are partly responsible for how poor they are.
In Migrant Camps, Anxiety and Relief: ‘It Was Worth It. We Are in America.’
NY Times – May 12
… Outside a shelter in McAllen, Texas, Ligia Garcia pondered her family’s next steps. She was elated to have finally made it across the Rio Grande, but with no family in the United States, and no money, they found themselves in the same situation as thousands of other migrants along the border with Mexico: waiting, while relying on the kindness of strangers.
“We will seek assistance for now, because we have no money and no choice,” said Ms. Garcia, 31, a Venezuelan migrant carrying her 6-month-old son, Roime, near the bulging shelter run by Catholic Charities. “It was a big sacrifice to get here,” she said, describing how she and her husband traveled with their two children across the jungles of Central America, then Mexico, to reach Texas. “But it was worth it. We are in America.”
While Mexicans and Central Americans for decades represented the majority of migrants seeking entry into the United States, Venezuelans have been crossing the southern border in ever greater numbers, and they recently dwarfed the numbers of migrants from Guatemala, Honduras and El Salvador. …
(It’s a lengthy story. This is a tiny part of it.)
Large influxes of migrants are opposed by the mass of Americans because of the instability they will cause in the labor markets. They will definitely not be confined to agricultural and slaughterhouse type operations. In the Chicago area they are opposed by construction labor in particular because of their tendency to undercut wages by non union “bargain” rates.
Jackd
no doubt. but the answer is not mass incarceration.
legal immigrants would be harder to exploit. unions could fix the wage issue.
making it an issue of race hysteria will not help.
i would like to see model small cities in mexico or other countries where people could find work and protect themselves from gangs. u.s. could help. miracle of capitalism and all that.
A majority of Americans say immigrants mostly fill jobs U.S. citizens do not want
Pew Research – June 10, 2020
Americans generally agree that immigrants – whether undocumented or living legally in the country – mostly do not work in jobs that U.S. citizens want, with a majority saying so across racial and ethnic groups and among both political parties. This is particularly true when it comes to undocumented immigrants. About three-quarters of adults (77%) say undocumented immigrants mostly fill jobs U.S. citizens do not want …
Then, no doubt, the issue becomes…
If the horde of immigrants weren’t on our doorsteps, then all those lazy non-working US citizens would be forced to take those jobs that they say they don’t want.
Or could be forced, if guv’mint benefits could be cut back forthwith/posthaste.