Nobody From Nowhere (@i8dc)

Occasional Common Sense

Why debt ceiling leverage is on Obama’s side

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The government is shut down, the House won’t vote on the Senate’s clean continuing resolution, and the Senate won’t vote on the House’s piecemeal attempts to fund 2.5% of the government. And next week, on or about October 17, the U.S. Treasury will be unable to pay all of the government’s bills because the debt ceiling will be reached.

Most talk about the debt ceiling is that Republicans get leverage through it, just as a ticking bomb gives a hostage-taker leverage. But I think this is wrong; the approaching debt ceiling actually gives Obama leverage.

In case you’ve forgotten, the radical tea party faction of the Republican party has tried to use any and all budget levers to force Obama and the Democrats to de-fund, de-scope, or delay implementation of the Patient Protection and Affordable Care Act (PPACA), also known as Obamacare.  Democrats have said they will not negotiate away any piece of Obamacare. They don’t note frequently enough that they’ve already “negotiated” on the budget, passing almost everything Republicans have asked for in spending cuts (against best economists’ advice), and trying to move to a House-Senate conference to work out budgetary differences 19 times since April (blocked by Republicans every time).

On the debt ceiling, Obama has been unequivocal, saying there will be absolutely no bargaining based on the proximity of the debt ceiling, and has called for Congress to raise the debt ceiling to pay for the spending it has already authorized. Lots of people don’t believe Obama’s “no bargaining” stance is real, in part because of the potential consequences, in part because in the past he and the Democrats have caved on the budget every time.

I’m convinced this time is different. And it seems like Obama does too. But how can he stick to a “no negotiating” position when his adversaries are so clearly willing to let the bomb explode?

The debt ceiling is a ticking bomb; it would cause the government to be unable to meet its legal obligations, and would eventually lead to a default – the failure to repay its debts.  Unlike almost everybody I read, I think Obama’s decided he can defuse that bomb by himself.  If he’s right, the dynamic is completely different. If he’s right, he’s not worried about the consequences of the debt ceiling, but is focused on what happens if he unilaterally defuses the debt ceiling bomb.

Suppose we get to the debt ceiling. Obama will be bound by several laws, and will have to pick which ones to break. Most basically, Congress has passed appropriations laws that obligate the government to spend money, while passing a debt ceiling that limits the government’s borrowing power. The laws are in opposition, which means that when we get to the ceiling, following one law necessarily means breaking another.

So which law should Obama break? The one that would cause more harm to the country. Clearly the answer to that question is the debt ceiling.

Providing additional support is the 14th amendment (which Obama says he won’t rely on), which states that the national debt shall not be questioned. Clearly this clause of the Constitution trumps any law that would “question” repayment of the debt. Some say this applies only to debt, not to other obligations of the government such as paying contractors, issuing Social Security checks, or other Congress-approved spending.  They assert that the government can prioritize payments such that the debt could be repaid first.

Even if this is true, the President would still be faced with another unacceptable problem: picking and choosing from appropriations for the money not spent repaying debt.  This would be a Constitutional problem more fundamental than the 14th amendment.

Appropriations must originate in the House, and the president as the leader of the government must spend as Congress directs. Not since Richard Nixon caused Congress to pass the Impoundment Control Act of 1974 has the president been able to unilaterally choose to not spend funds as directed by Congress. The president simply has no legal authority to pick and choose from Congress’s appropriations.

This leaves the president with only one option: ignore the debt ceiling and direct the Treasury to continue to run debt auctions as before. It is certainly possible (likely) that purchasers will demand higher interest rates for these securities, as they are enormously sensitive to risk. But they would sell. And even if the auctions were to go poorly, there’s nothing to stop the Federal Reserve from buying everything in them to keep the yields down. And if this caused the Fed to be concerned about its balance sheet or inflation, it could sell other securities it currently holds on the open market.

Now, look at the politics.

Conflicting laws means Obama would choose which to break. The GOP could take him to court regardless of the course of action he chose; if he chose to not to follow any individual Congressional appropriation, Congress could take him to court. With the tea party faction in ascendency in the Republican party, Obama could logically decide no course of action would avoid a legal challenge.

So he would have to choose between two paths: ignore the debt ceiling and continue to spend as Congress has directed, or prioritize spending based on incoming revenue. Note the irony: the tea party, which doesn’t trust Obama to do anything, wants Congress to shift responsibility for prioritizing its appropriations to Obama. The tea party, which claims at its root a love for America’s founding principles, wants to precipitate an unprecedented shift of non-wartime spending power to the president.

Imagine it. The president could fund only discretionary programs he most favors. Or even better, he could decide to spend federal money only in districts whose Congressmen favor raising the debt ceiling. Would this be incredibly destructive and unfair? Sure. But illegal? The president picking and choosing spending within a program would be no more illegal than picking and choosing entire spending programs. He has no business doing either.

This tea party, parts of which fervently believe Obama has no legal authority to be president, would give Obama unprecedented powers. Obama would note the absurdity, note that this organization can’t even act in what it perceives to be its own interest, and point out that his choice to ignore the debt ceiling law would be the only way to prevent this inappropriate power shift to the executive branch.

That’s right; that rabid, power-hungry socialist Barack Hussein Obama would move to deny himself power.

Then he would invite a court challenge. I’m pretty confident that the Supreme Court would agree that Congress shirking its budgetary responsibilities is intolerable. That opposition of the debt ceiling and appropriations laws would give them an easy way out that doesn’t involve constitutional questions, and they’ll usually jump at the chance to not answer constitutional questions.

The president would come out as the guy who’s most looking out for the country, and also as a president who turned down unprecedented power. A big chunk of the rationale behind the tea party movement would be seriously damaged. And the GOP, for enabling this crazy faction to hijack its agenda, would be weakened.

It’s a high-risk situation that could end up hurting the economy and costing the government (and everybody else) money through higher interest rates. But it might get rid of the debt ceiling nonsense and the tea party nonsense all at once.

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Written by David Clayton

October 8, 2013 at 3:24 pm

Posted in Debunkery

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