Slouching Towards Oblivion

Showing posts with label manufactured fiscal emergency. Show all posts
Showing posts with label manufactured fiscal emergency. Show all posts

Sunday, May 07, 2023

Money Matters


Larry Tribe gets a bit earnest on occasion, but the guy knows his shit, and makes good arguments for good sense.


Why I Changed My Mind on the Debt Limit

At this moment, at the White House as well as the Departments of Treasury and Justice, officials are debating a legal theory that previous presidents and any number of legal experts — including me — ruled out in 2011, when the Obama administration confronted a default.

The theory builds on Section 4 of the 14th Amendment to argue that Congress, without realizing it, set itself on a path that would violate the Constitution when, in 1917, it capped the size of the federal debt. Over the years, Congress has raised the debt ceiling scores of times, most recently two years ago, when it set the cap at $31.4 trillion. We hit that amount on Jan. 19 and are being told that the “extraordinary measures” Treasury has available to get around it are about to run out. When that happens, all hell will break loose.

Taking advantage of that prospect, congressional Republicans are threatening to do nothing unless the administration agrees to slash lots of government programs that their party has had in its sights. If the president caves to their demands, they will agree to raise the cap — until this crisis occurs again. Then, they will surely pursue the same game of chicken or, maybe more accurately, Russian roulette. It’s a complicated situation, but a solution is staring us in the face.

Section 4 of the 14th Amendment says the “validity” of the public debt “shall not be questioned” — ever. Proponents of the unconstitutionality argument say that when Congress enacted the debt limit, effectively forcing the United States to stop borrowing to honor its debts when that limit was reached, it built a violation of that constitutional command into our fiscal structure, and that as a result, that limit and all that followed are invalid.

I’ve never agreed with that argument. It raises thorny questions about the appropriate way to interpret the text: Does Section 4, read properly, prohibit anything beyond putting the federal government into default? If so, which actions does it forbid? And, most important, could this interpretation open the door for dangerous presidential overreach, if Section 4 empowers the president single-handedly to declare laws he dislikes unconstitutional?

I still worry about those questions. But I’ve come to believe that they are the wrong ones for us to be asking. While teaching constitutional law, I often explored the problem of bloated presidential power, the puzzle of preserving the rule of law in the face of unprecedented pressures, and the paradox of having to choose among a set of indisputably bad options. During my last semester teaching, with Covid forcing my seminars from the classroom to the video screen, I studied the most insightful literature on the debt ceiling and concluded that we need to reframe the argument.

The question isn’t whether the president can tear up the debt limit statute to ensure that the Treasury Department can continue paying bills submitted by veterans’ hospitals or military contractors or even pension funds that purchased government bonds.

The question isn’t whether the president can in effect become a one-person Supreme Court, striking down laws passed by Congress.

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.


There is only one right answer to that question, and it is no.

And there is only one person with the power to give Congress that answer: the president of the United States. As a practical matter, what that means is this: Mr. Biden must tell Congress in no uncertain terms — and as soon as possible, before it’s too late to avert a financial crisis — that the United States will pay all its bills as they come due, even if the Treasury Department must borrow more than Congress has said it can.

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.” Above all, the president should say with clarity, “My duty faithfully to execute the laws extends to all the spending laws Congress has enacted, laws that bind whoever sits in this office — laws that Congress enacted without worrying about the statute capping the amount we can borrow.”

By taking that position, the president would not be usurping Congress’s lawmaking power or its power of the purse. Nor would he be usurping the Supreme Court’s power to “say what the law is,” as Chief Justice John Marshall once put it. Mr. Biden would simply be doing his duty to “take care that the laws be faithfully executed” even if doing so leaves one law — the borrowing limit first enacted in 1917 — temporarily on the cutting room floor.

Ignoring one law in order to uphold every other has compelling historical precedent. It’s precisely what Abraham Lincoln did when he briefly overrode the habeas corpus law in 1861 to save the Union, later saying to Congress, “Are all the laws, but one, to go unexecuted, and the government itself go to pieces, lest that one be violated?”

For a president to pick the lesser of two evils when no other option exists is the essence of constitutional leadership, not the action of a tyrant. And there is no doubt that ignoring the debt ceiling until Congress either raises or abolishes it is a lesser evil than leaving those with lawful claims against the Treasury out in the cold.

Of course, my solution might roil the bond markets and cause lenders to demand a premium for extending credit to the United States. But no path out of the dilemma is without risk.

Some will say that letting the president ignore the statutory limit on borrowing would give him too much power and represent a dangerous step in a tyrannical direction. Wrong. What I propose would in truth give the president a lot less power than entrusting him to decide which of the government’s promises to honor and which creditors to stiff — a power that the Supreme Court denied him when it handed down a 1998 decision that prevented him from vetoing line items within a budget.

In any event, Section 4 prohibits the president from permanently stiffing our creditors — even those required to wait their turn after the Treasury runs dry. So even if Speaker Kevin McCarthy and those pulling his strings succeed in making some of those creditors wait, it wouldn’t eliminate our debts; it would merely replace them with i.o.u.s. And that’s just debt in another form.

All Congress would have done is create economic catastrophe on top of constitutional crisis — and without securing compliance with the debt ceiling that Republican claim to want. The only way out of this forest is through the trees.

Wednesday, January 09, 2013

The Krugman Speaks

The true sign of competence (if not genius) is the ability to explain some of the high-brain complicated stuff in a way that makes it understandable to guys like me.

(This not to be confused with the usual mode of Repubs to dumb everything down so as to give the rubes the comfortable feeling that anybody with a GED and the "common sense of the country-folk" could run this joint).

Anyway - Paul Krugman at NYT (re: the Trillion Dollar Coin):
There seem to be two kinds of objections. One is that it would be undignified. Here’s how to think about that: we have a situation in which a terrorist may be about to walk into a crowded room and threaten to blow up a bomb he’s holding. It turns out, however, that the Secret Service has figured out a way to disarm this maniac — a way that for some reason will require that the Secretary of the Treasury briefly wear a clown suit. (My fictional plotting skills have let me down, but there has to be some way to work this in). And the response of the nervous Nellies is, “My god, we can’t dress the secretary up as a clown!” Even when it will make him a hero who saves the day?
The other objection is the apparently primordial fear that mocking the monetary gods will bring terrible retribution.
 --and--
The other side of this debate has been predicting runaway inflation for more than four years, as the monetary base has tripled. The same people predicted soaring interest rates from government borrowing. Meanwhile, the liquidity-trap people like me predicted what would actually happen: low inflation and low rates. This has to be the most decisive real-world test of opposing theories ever.
"Them Damned Libruls" have been right about a lot.

Friday, November 23, 2012

The Tax Thing

I've seen and heard some whining going on about what a bitch it'll be for hard-working white-collar Dems who'll have to pony up on the tax raise because they're busy making money north of the magic $250k level, living in a not-very-fancy neighborhood with a coupla kids etc - and now they have to get ready to pay up on Obama's promise to hike taxes, and it's so unfair because gee, $250k just doesn't buy what it used to buy blah blah blah.

Please - get a fuckin' grip.  You're supposed to be the "smart ones", remember?

Obama's basic plan is to boost the tax rate on income OVER $250k, which means you'll pay exactly the same rate on the FIRST $250k; paying the higher rate only on the amount you earn after $250K.

You sit down and do just a tiny bit of arithmetic, and wow - look at that - if you're pullin' down $300k, your total rate goes up by about 3/4 of 1%.  Think you can handle that one, Mr Super-Genius?

Monday, March 07, 2011

Nobody Tells Us

I was in a running battle on FaceBook last week with an old high school buddy who insists that Gubmint Workers are greedy and that the real problem is that their retirement bennies are causing the states to go broke.

When I'm talking politics or anything else, my training tells me to listen, process, deconstruct, reconstruct and then rebut.  I'm learning (gradually) that the talking points from Right Radicals need to be dismissed loudly as soon as they fall outa their little pie holes - no matter what it is, I'm trying to retrain myself to demand verification and backup.

Unfortunately, as Mr Churchill said, "A lie gets halfway around the world before the truth has a chance to gets its pants on."

From McClatchy:

A close look at state and local pension plans across the nation, and a comparison of them to those in the private sector, reveals a more complicated story. However, the short answer is that there's simply no evidence that state pensions are the current burden to public finances that their critics claim.