In a time that increasingly resembles the Great Depression, Congress shouldn't play politics with raising our debt ceiling
My last post, entitled "The Speech Obama Could Give," was an imaginary presidential address in which Obama announces that if Congress refuses to raise the statutory debt ceiling, he will not observe it, at least to the extent that doing so would require him to default on interest payments on the national debt, suspend payments to Social Security recipients, or withhold paychecks of U.S. troops during Congressionally authorized military action.
The post has drawn some reaction, which I think is a sign of the underlying anxiety people are feeling as Republicans juggle the dynamite of potential default. Emil Henry, a former Bush administration treasury official, calls the ritual of debt-limitation debates a "Kabuki dance." As part of this ritual, my speech was intended to suggest that there are both ramifications and responses to potential default that we may not have foreseen.
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.
As for the consequences, I am a constitutional lawyer, not an economist. But as a matter of common sense, a delay in raising the debt limit may have malign results even if the United States does not technically default on bond-interest payments. I have been reading David Kennedy's Freedom from Fear: The American People in Depression and War, 1929-1945, and I am not sleeping well. The current year seems uncomfortably like 1931, when some brave forecasters still nourished hope that recovery was underway. Shocks to confidence in the nation and the world kept coming, however, until by early 1933 severe recession had become unparalleled catastrophe.
Since 2008, we've heard several times that recovery has begun; but events around the world--European debt crises, Middle East revolutions, the earthquake, tsunami and meltdown in Japan, and now political infighting in Washington--keep intervening to strangle it.
So it seems like a bad time for Congressional Republicans to point a gun at the national credit rating and scream, "One step and I'll shoot!" If the debt limit increase is snarled, confidence in our bonds may crater even if Treasury is able to find a temporary way to maintain the interest payments. If the world no longer feels solid about U.S. debt, the consequences could be as bad as 1932-33.
That's where the good old text of the Constitution comes in--the actual text, not the mythical snippets that many Americans misremember from eighth-grade civics, and not the truncated redaction that too many lawyers, alas, learn in their first-year Con Law class.
Section Four of the Fourteenth Amendment states, at its outset, that "[t]he 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." This section was inserted into the Amendment because of a very real concern that Southern political leaders, and their Northern allies, would gain the upper hand in Congress in the 1866 or 1868 elections and vote to repudiate the national debt.