Debt Default Lies
A liar is a person who makes a statement knowing that it’s not true. Simple enough.
How about a person who makes a statement that is superficially or partially true but made in the spirit of misleading others to believe something not true? Well, I’ll let God sort that one out.
The good book says that liars have their place in Hell so there should be a lot of politicians there.
Obama, Reid, Pelosi, Treasury Secretary Lew, and the media have been a Greek chorus of late, warning of the perils ahead if the limit on Congress’ credit card is not immediately and unconditionally raised. They falsely claim that the federal government will default on its debt unless the debt ceiling is raised, they falsely claim that King Obama can raise the debt ceiling on his own authority if he chooses, and they falsely claim that entitlement programs are constitutionally protected. All lies.
Let’s take them in order.
A debt default means that a contractual obligation to service a debt was not performed at the time required. If the debt ceiling isn’t raised, it means our government, which borrows 40¢ of every dollar spent is going to have to make some choices. But servicing the national debt is not one of them. The revenues taken in as taxes are ten times the interest on the national debt – ten times! About $250 billion per month is received as government revenue and about $23 billion in interest is paid to the holders of the national debt. Maturing obligations that require the redemption of debt principal are simply rolled over into new debt using the proceeds to redeem the maturing debt without a net increase (or decrease) in debt.
The assertion that a debt default will occur unless the debt ceiling is raised is laughable. The money is there and there’s no choice – payment of national debt obligation is a constitutional compulsion. It’s called the 14th Amendment, Section 4.
Let’s just check that Section out for the benefit of the Greek chorus, shall we?
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 …
Hmm. Not a lot of wiggle room there.
The 14th Amendment was adopted in 1868 as part of post-Civil War Reconstruction. The “debt shall not be questioned” clause was put in to assure that if the new Southern members of Congress were to gain a majority, they couldn’t repudiate the Northern war debt. In other words, “shall not be questioned” meant a Southern legislator couldn’t challenge that his constituents shouldn’t be paying taxes to reduce a debt that was created to defeat the South, kill Southerners, and destroy their property. Taken as a generalization, it means debts must be paid.
So, why do you think the Greek chorus is lying, claiming that a failure to raise the debt ceiling is tantamount to a debt default? I’ll give you three guesses and the first three don’t count. To scare the pants off of a public that is marginally literate in how its government works – of course!
Conceivably, the debt ceiling might have to be raised in the future to pay obligations on the national debt. Let’s hope that day never comes. The country would be in economically sad shape. Thankfully that isn’t the case today because there is sufficient cash coming in to pay the debt with a lot left over. But not enough is left over to pay all of the obligations at the current level of spending. So, excluding debt payments, spending obligations must be prioritized. Gee. Isn’t that what families do until they can reduce their spending to align it with income?
Establishing a debt ceiling was one of the few intelligent things Congress has done. It forces the issue to the forefront periodically, usually grabbing the headlines for a few weeks and rousing the public from its slumber. The people’s representatives are forced to do combat over what price will be exacted and how much will the ceiling be raised. But the ceiling always gets raised.
Raising the debt ceiling simply allows Congress on both sides of the aisle to run up new debt, which lately they’ve been able to do pretty quickly, and then the hogs are back at the trough and locked in another debt ceiling fight. But eliminating the debt ceiling altogether and allowing Congress to spend as it wishes, which some have suggested, is sheer folly. There are no adults in Washington and giving kids a credit card with no limit is stupidity on stilts.
As much as I hate this periodic kabuki theater of closing public parks and pretending the economic sky is falling, it fills a useful purpose. Who knows? Maybe one day the public will wake up, realize debt default isn’t possible, and that spending reductions are a more sensible way to reduce the frequency of these charades. The Left is terrorized that this might happen.
And the Left says, “Well, if you’re going to get ‘constitutional’ about this, show me where in the Constitution a debt ceiling is established.” Can’t. It’s not in there. The debt ceiling is a congressional procedure, not a Constitutional provision.
So, why can’t King Obama raise the debt ceiling on his own authority, the Left whines? Because he doesn’t have the Constitutional authority. The power of the purse resides exclusively in the House – not the President, not the Senate. The power to tax the credit of the United States with debt was meant by the Founders to rest with the people’s representatives, who could throw those representatives out of office every two years if they disagreed with the Representative. (Oh, that we might have an electorate so informed.)
The debt ceiling is the step-child of a bygone era in which every issuance of public debt had to be voted on and its purpose challenged. Laziness and expediency have rolled the individual obligations into a general “debt ceiling” number that gets fought over when Congress spends itself to the limit. We would be better off if every bill funded by debt had to be fought out on its merits. The fact that we have to raise the debt ceiling so often suggests rolling all borrowing into one ball isn’t working.
King Obama apparently looked into the possibilities of by-passing Congress on the debt ceiling debate several years ago. His lawyers told him that taking over the role of Congress wasn’t a winning play. Hmm. Just when he was considering Congress irrelevant.
This brings us to the third false claim by the Greek chorus – that entitlements are Constitutionally protected, presumably under the 14th Amendment mandate to service the public debt. Ahh. Nice try. But the Constitutional wording says “debts” not obligations. The original draft of the Amendment used the word “obligations,” but an astute Congressman replaced it with “debts” which not only zeroed in on the real intent of Article 4, but also narrowed the focus specifically to debts – transactions that involved borrowing and repayment.
Entitlements never involved borrowing and are not debts. They represent a future liability – unfunded mostly, such as Social Security, Medicare, and Medicaid – but never transactions with Constitutional protection. The debts incurred by one Congress bind future Congresses under the 14th Amendment. Not so with entitlements, which are political programs. Entitlements passed by one Congress can be repealed by a future Congress, defunded, expanded, or modified in scope. Each Congress may have its way with entitlements because they aren’t debts, even though they are implicit promises.
FDR knew Social Security lacked Constitutional protection and he may have had enough foresight to know future Congresses would try to repeal or diminish the program. Responding to a critic who questioned the economic soundness of the program, he said,
I guess you’re right on the economics, but those taxes were never a problem of economics. They are politics all the way through. We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions … With those taxes in there, no damn politician can ever scrap my social security program.
Well, notwithstanding the fact that payment on the national debt was never in doubt by the shutdown, the Republicans led by McConnell the Dinosaur and Boehner the Weak caved and gave the Democrats a new credit card until early next year. They are busy running up its balance to the limit.
Twenty-seven Republicans signed the surrender document in the Senate along with 87 House members. I hope they can explain their perfidy to the folks back home. Of course, all House and Senate Democrats voted “aye” before rushing for their Committee checkbooks.
Not so subtly hidden in the voting stats is this: 40% of McConnell’s caucus and 62% of Boehner’s voted against their leader. I’d say both have cause to worry when they stand for reelection as the Senate and House leaders – assuming they have the gall to run.