Well, today was the day, by some accounts that was the deadline for getting our debt crisis fixed. After all, it’s not enough to pass a bill, you have to do everything that is needed to bring it down to having a practical impact.
And that isn’t going to happen.
So now, presuming no moves of compromise, a new hope is that President Obama will “take the 14th” and unilaterally raise the ceiling.
The justification for this can be found here:
Some analysts say no — Obama can simply order the Treasury to pay its bills even if Congress refuses to raise the $14.3 trillion debt ceiling.
“Preventing default is no less justified than using American military power to protect against an armed invasion without a congressional declaration of war,” Bruce Bartlett writes in Fiscal Times.
Like others, Bartlett cites a section of the 14th Amendment to the U.S. Constitution that says, “The validity of the public debt of the United States, authorized by law … shall not be questioned.”
“This could easily justify the sort of extraordinary presidential action to avoid default that I am suggesting,” Bartlett writes.
So, the president orders, and thus, everything works fine, right?
Wrong. There are two problems with this.
1. There is no real certainty that the 14th amendment would be held to give the executive that sort of wide ranging authority. This would be a major constitutional crisis, easily on a par with any that have come before, calling into question the separation of powers within the United States government. Some Republicans have already threatened to initiate impeachment proceedings should the president do so, and while we can’t be certain how it would turn out, we can be certain that the federal government would be paralyzed…and would you loan money to a group that might not be in power to repay you?
2. Bond ratings aren’t simply about ability to pay, they’re about the stability of the government in question. Third world nations aren’t simply bad risks because they don’t have any money– they’re bad risks because your money may become their money if there is a shift in power. With a government in disarray with the executive being forced to use powers that have never been tested in the court system and congress quite possibly launching (however doomed to failure) impeachment proceedings, even a blind man would be able to see that our government is not stable, and more importantly, the question of who got paid and how might very well depend on who won the political battle.
In other words, welcome to the united states of Third Worldia.
There is no solution to this other than a debt ceiling deal, in congress. Clever tricks won’t help, because they will, if anything, make the instability worse. Fundamentally, the Washington political situation is at a stalemate not seen since the 1930’s, and until that is resolved, don’t be surprised if bond agencies rate us as a bad risk.