The Bishop and the Butterfly: Murder, Politics, and the End of the Jazz Age
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    The Debt Ceiling and the 14th Amendment...Who Knew?

    By stillidealistic on Wed, 06/29/2011 - 12:20am |

    Well, according to a piece on Countdown tonight, the Dems may be able to skewer the Repubs with the Constitution itself, making raising the debt ceiling a moot point, and at least temporarily taking away the possibility of a default.

    The 14th Amendment states in section four: "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."

    Apparently a number of constitutional lawyers are saying this means that the government has the Constitutional obligation to pay its debts and that a "debt ceiling" violates that provision.

    The way it would work is, the President just says we're going to pay the bills. Then the Repubs in Congress will pitch a hissy and life goes on, much as what has happened in Libya. Hmmmm....

    Won't it be interesting to see what the Tea Party thinks, since they are all about the Constitution. Supposedly.

    Comments

    I picked it up a couple hours ago and posted it in the corner.

    This is really something alien to me. I mean who reads the fourth section of the Fourteenth anyway?

     

    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.

     

     

    In 1935, the Supreme Court held that despite the Civil War context, the amendment clearly referred to all federal debt.

    "While [the 14th Amendment] was undoubtedly inspired by the desire to put beyond question the obligations of the government issued during the Civil War, its language indicates a broader connotation," the majority wrote in Perry v. U.S. "We regard it as confirmatory of a fundamental principle which applies as well to the government bonds in question, and to others duly authorized by the Congress as to those issued before the amendment was adopted. Nor can we perceive any reason for not considering the expression 'the validity of the public debt' as embracing whatever concerns the integrity of the public obligations."

    The law at issue, which tried to override the validity of a bond offering, "went beyond the congressional power," the Court ruled, setting a precedent that has not been overturned.

    http://www.huffingtonpost.com/2011/06/28/14th-amendment-debt-ceiling-unconstitutional-


    by Richard Day on Wed, 06/29/2011 - 12:30am

    So another words, the worry is panic in the bond markets. It don't take much to spook the bond traders. Testing the 14th Amenment might put a end to this game from now on.

    by trkingmomoe on Wed, 06/29/2011 - 12:57am

    Follow the money. Who are the beneficiaries, if a default occurs or the fear of one?

    Bernanke says interest rates will likely rise  

    BERNANKE'S WARNING: Debt Ceiling Failure Will Kill The Dollar, And Trash America's Credit Rating
    Read more: http://www.businessinsider.com/bernanke-on-the-debt-ceiling-2011-6#ixzz1QdrzNBJO

    What does it mean "will kill the dollar"?  Devaluation?

    Who benefits from a devalued dollar?

     


    by Resistance on Wed, 06/29/2011 - 2:10am

    What is Federal Reserve charged to do?

    • To maintain stable prices (control inflation)
    • To ensure maximum employment and production output

    Reading the Bernanke speech at the link you provided, one would think he's only concerned with the first goal. And, judging by the Fed's pronouncements and its actions, that's about right.

    Bernanke takes it as a given that deficit spending is the greatest threat our country faces. Though his tone is calm and his prescriptions are measured, he apparently cannot even entertain the idea that more jobs and better wages are the springboard to balancing income and outgo. Nor can he be bothered to understand what the CBPP chart, below, so clearly demonstrates.

    CBPP- Causes of the DeficitApparently, he does he understand that it is the Bush tax cuts, and the Bush/Obama wars, that contribute most to the growing deficit. Instead, he threatens cuts in Medicare, Medicaid and Defense. The way Bernanke frames the issue provides cover for Republicans and corporate Democrats who want to leverage default as a means to gut America's working classes.

    Who benefits from such brinksmanship? Global corporations.

    By the way, and unrelated to the inane standoff over the debt, there is a solid argument that American workers would benefit from a devalued dollar. Economists like Krugman, DeLong, Baker and Bernstein have been making the case for quite a while.


    by Red Planet on Wed, 06/29/2011 - 7:47am

    By the way, and unrelated to the inane standoff over the debt, there is a solid argument that American workers would benefit from a devalued dollar. Economists like Krugman, DeLong, Baker and Bernstein have been making the case for quite a while.

    Will try to check out those links but...perhaps so, but were they recommending doing that by defaulting on the national debt, versus in other ways?  The former, after all, carries with it some potentially pretty severe consequences for the country's ability to engage in deliberate, desirable future short-term deficit-increasing spending increases, no? 


    by AmericanDreamer on Wed, 06/29/2011 - 5:04pm

    Who benefits from a devalued dollar?

    Well, not to be all selfish, but in the short term, I do. 


    by Orlando on Wed, 06/29/2011 - 12:01pm

    Who benefits from a devalued dollar?

    In the short run at least, debtors and exporters benefit.

    Debtors benefit and creditors are worse off, at least in the short run, because the dollars the debtor uses to pay off the debt are worth less, they will buy less, than they were at the time the creditor loaned them. 

    Exporters benefit because a weaker dollar means other countries can afford more of "our" products (or at any rate, products made in the US, which for some time now has not been one and the same thing as "our" products in the sense of being made by US-domiciled companies).  They can do that because their currencies are worth more relative to our currency.  By the same dynamic, importers are hurt--the prices of products purchased from abroad would go up for consumers.

    We the taxpayers ultimately have to pay off the federal debt.  If a default results in the US government's credit rating essentially being lowered that almost surely will increase the interest rates our government will have to pay to borrow money, which it has to do a lot of these days to pay its bills, including ones for services (and debt service) we expect and rely on, all of us.  You and I and our kids are going to be paying that debt off. 

    Just because bankers hate currency devaluations doesn't mean that, therefore, it's always or necessarily a good thing overall for the country.  Imagine that!

    P.S. I'm pretty sure what I wrote above is correct but if destor or others think any of it requires correction I hope they'll do that.


    by AmericanDreamer on Wed, 06/29/2011 - 12:54pm

    ...and the mega-wealthy will short the market and make a killing. Even in financial disasters, fortunes can be made. That's why I'm so unsure which way the wealthy will steer the repubs to go on this.


    by stillidealistic on Wed, 06/29/2011 - 4:08pm

    Here's a link to an article in The Atlantic on the subject ...

    Our National Debt 'Shall Not Be Questioned', the Constitution say

    http://www.theatlantic.com/politics/archive/2011/05/our-national-debt-sh...

    Here's it in a nutshell ...

    • First, it does not simply say that the national debt must be paid; it says that its "validity ... shall not be questioned."
    • Second, it suggests a broad definition of the national debt: "...including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion."
    • From this language, it's not hard to argue that the Constitution places both payments on the debt and payments owed to groups like Social Security recipients--pensioners, that is--above the vagaries of Congressional politics. These debts have to be paid, the argument would be, in full, on time, without question.  If Congress won't pay them, then the executive must.

    The author, Garrett Epps - former reporter for The Washington Post and legal scholar - goes into interesting historical details about the Amendment, but it does give Obama a frame of reference to thumb his nose at McConnell and the GOPer's as well as give the Democrats amunition for 2012 how little the GOPer's care about the Constitution and use when creating legislation.

    But that presumes the Democrats show they public they have cojones, like Weiner, to use it as a training device and give their fellow members a through horse whipping they so justly deserve.


    by Beetlejuice on Wed, 06/29/2011 - 8:20am

    Thanks for the support info, Beetle. When I was googling last night I wasn't finding anything! This has the potential for getting interesting.


    by stillidealistic on Wed, 06/29/2011 - 10:17am

    nottaworry, mate! This is what makes politics and blogging so interesting ... exchanging ideas and information at the local/public level to fuel an intelligent discussing of the debate so those in Washington know we're not as stupid as they assume us to be.


    by Beetlejuice on Wed, 06/29/2011 - 10:33am

    Dear Lord, please let the Democrats use this option! It will give us a rare opportunity to see Limbaugh, Hannity, Palin, Bachmann and Beck's heads explode ... simultaneously.  What better entertainment on a Fourth of July weekend?


    by MrSmith1 on Wed, 06/29/2011 - 9:28am

    It would be an interesting debate to hear them all argue how unconstitutional the Constitution is, wouldn't it?


    by Beetlejuice on Wed, 06/29/2011 - 9:34am

    I'm up for just about anything that would make all those heads explode at once!


    by stillidealistic on Wed, 06/29/2011 - 10:13am

    Unfortunately, the debt ceiling doesn't say anything about the validity of existing debt, it just forbids the Treasury from issuing new bonds.  We need to issue new bonds to pay old debts (and to provide the financial system with liquidity, another thing the Republicans don't care about) but the Treasury has other options for paying the debt, including diverting spending from active programs and selling national assets such as mining rights, land held by the federal government and gold held in reserves.  In short, the U.S. can meet its constitutional obligations without the debt ceiling being raised.  But it will hurt.


    by Michael Maiello on Wed, 06/29/2011 - 9:34am

    I believe the new argument is the 14th Amendment invalidates the debt ceiling ... the debt exists because Congress failed to allocate funding for the laws they enacted in the past. Anything enumerated in the Constitution is supreme unless there's another amendment that invalidates it. So the 14th Amendment reigns supreme over a Congressional law limiting the Treasury from issuing new bonds. So if Congress wishes to eliminate the debt, they need to go back and figure out how to fund the laws they failed to fund in the past. But the way the word pensioner is used in the 14th just shoved a pipe wrench in the spokes of their wagon ... in means social security and medicare of off-limits now.


    by Beetlejuice on Wed, 06/29/2011 - 9:48am

    That's the way I'm reading the new argument, Beetle. But who knows what twists and turns it will take? I just thought it was an interesting take which merited discussion.


    by stillidealistic on Wed, 06/29/2011 - 10:12am

    Definitely interesting and I agree with Beetle that it means the existing Social Security obligations can't be ignored, which is good.  Though the Supreme Court has held that the federal government can change benefits anytime it chooses, so that's a problem.  Technically, the government could make all of its bond payments by cutting benefits to zero, right?  What I mean is, so far as the Supremes are concerned, the debts are owed to the Social Security trust fund, not individual Social Security recipients.


    by Michael Maiello on Wed, 06/29/2011 - 10:19am

    But the debt owed to the Social Security trust fund is the pensioners ... they're one in the same. I suspect the word pensioner, at the time the Constitution was draw up, was an all encompassing term, not individual as the GOper's will try and paint it.

    But what's really intriguing is that stunt at the opening of Congress ... reading the Constitution ... is bearing fruit. Of course, the GOP'ers will say it's sour but as Rachel Maddow says ... words have consequences. And I wonder how responsive the tea-baggers will be if Obama follows the 14th to the letter and trounces the GOP on the debt issue. After all, it was their demand to have it read, wasn't it?


    by Beetlejuice on Wed, 06/29/2011 - 10:42am

    As with the Bible, they want the "good parts" version of the Constitution read.  I bet most of those Teabaggers think everything after the Bill of Rights doesn't count.

    I am pretty sure, though, that the government doesn't consider Social Security recipients to be pensioners.  Benefits can be cut, eliminated or raised any time Congress wants to do so.


    by Michael Maiello on Wed, 06/29/2011 - 10:47am

    That's the whole debate!

    Is a social security recipent a pensioner?

    And that's the debate the public needs to weigh in on to let Congress know what they think.

     


    by Beetlejuice on Wed, 06/29/2011 - 10:55am

    Sadly, this is the case that settled the issue.  Back in 1937, Congress decided to cut off people from Social Security if they were deported for being Communists.  One deportee sued, arguing that he had paid into the system and earned rights as a pensioner, and lost in the Supreme Court.


    by Michael Maiello on Wed, 06/29/2011 - 11:28am

    Oh great, that'll probably be the neo-con pushback;  all recipients of social security are socialists, therefore commies, and they should all be deported, thus, in one fell swoop, killing social security, eliminating the debt and putting the budget back into surplus.   hahaha 


    by MrSmith1 on Wed, 06/29/2011 - 1:37pm

    Sad indeed.

    For 19 years this man paid into Social Security.   


    by Resistance on Wed, 06/29/2011 - 2:20pm

    No way Obama is going to be the first Prez to raise the debt ceiling on his own, the GOP would love it, they would say the Democrats are totally out of control on the budget.

    It would make Boehner and Co. look like knights in shining budgetary armor, and make Obama appear to be a thief, they would exploit the move from now until election day. No, the GOP must be on the hook on this one too, and Obama knows it.


    by NCD on Wed, 06/29/2011 - 6:05pm

    I guess this is why they get the big bucks. I wouldn't want to be the ones flirting with causing a world-wide depression! Nor would I want to be the dem pres who caved to the repubs bs in this game of chicken.

    To be candid, I would rather see Obama be the President who decides the debt ceiling is an arbitrary piece of garbage than the one who takes the first step toward removing the safety net from under those least able to fend for themselves.


    by stillidealistic on Wed, 06/29/2011 - 6:22pm

    If I understand this the Constitution trumps any other law like the debt ceiling.

    The debt ceiling raise is needed not for new spending but that that has been already authorized by Congress, ie by law and thus the President has 2 duties:
    1) Uphold all laws that have been passed
    2) The debt has already been committed to over many years so it is valid and "shall not be questioned.

    That makes using the 14th a no brainer.

    The Presidential oath also requires the President to protect and defend the Constitution. If he does not follow it as laid out above one could argue you could impeach him as well.

    In fact all members of Congress took a similar oath so their inaction to provide the debt ceiling action needed to fund the laws passed by them could be deemed a violation of their oath of office subjecting Boehner in particular to impeachment. Right?

    The other issue here is that failure to protect the nation's financial system from a meltdown is akin to "war" and the President again is bound to protect the nation as well. Keeping the nation from falling into a deeper recession, higher borrowing costs, higher deficits due to a double dip and the world losing faith in the US as a reserve currency makes his inaction on the 14th impeachable to me.

    Failure to act has been estimated to cost the US $50B minimum directly for even a few day default due to increased debt rollover costs and as much as a trillion over a decade not to mention higher borrowing costs for consumers and business as well.

    The President has put forth $2T in cuts and asked for $400B in tax loopholes being closed. Every deficit reduction plan that Reagan, Bush I and Clinton did required a combination. Why can't the Repubs simply negotiate in good faith and get this done?

    If they do not they will get hung out to dry by the President being forced to act under his Constitutional duty. That surely isn't going to help them defeat Obama. It might just sew up his re-election before they even have a primary.

    If they think he isn't tough enough to do this. Just remember the Sunday nite we found about Osama or the Somali pirates that were taken out right after he took office.

    If he needs to he will act and get the job done as he should, no doubt about it.

    Here is the case law to support it:

    PERRY V. UNITED STATES, 294 U. S. 330 (1935)

    The government’s contention thus raises a question of far greater importance than the particular claim of the plaintiff. On that reasoning, if the terms of the government’s bond as to the standard of payment can be repudiated, it inevitably follows that the obligation as to the amount to be paid may also be repudiated. The contention necessarily imports that the Congress can disregard the obligations of the government at its discretion, and that, when the government borrows money, the credit of the United States is an illusory pledge…

    The Constitution gives to the Congress the power to borrow money on the credit of the United States, an unqualified power, a power vital to the government, upon which in an extremity its very life may depend. The binding quality of the promise of the United States is of the essence of the credit which is so pledged. Having this power to authorize the issue of definite obligations for the payment of money borrowed, the Congress has not been vested with authority to alter or destroy those obligations.


    by John Nail (not verified) on Sat, 07/02/2011 - 5:33pm

    Hi, John...long time, no see.

    I hope you're right. Perhaps his calmness in this whole matter is due, in part, to his knowledge that he has a "plan b" in case they don't come to their senses. He IS a Constitutional Lawyer, so he should know better than most what he likely to be able to do under the Constitution (unless it's being interpreted by the current court, in which case it will be 5-4 in the opposite direction logical people think it should be!)


    by stillidealistic on Mon, 07/04/2011 - 1:46pm