#662 Musings Beyond the Bunker (Wednesday May 17)
Good morning,
THIS IS A GAME WITH CATASTROPHIC CONSEQUENCES
The debt ceiling is an idiotic concept that performs no productive purpose. It should be abandoned. Just to review for those who aren’t paying close attention, the debate is not about government spending or balancing the budget. The spending already has been authorized by Congress. Congress already approved expenditures after debating the merits of those appropriations (as broken as that process currently may be). The obligations already have been incurred. I doubt many legislators thought when the vote was held, “this is only round one.”
I’m quite sure that the Republicans do not have a singular hold on the obstruction that seems to have gripped the legislature. When they have been in a position to thwart Republican governance, they have done so. All I know is that the Republicans have perfected the art form and they use it with great effect, with seemingly no concern with the practical results of the brinksmanship we are witnessing. The fact is that the debate we’re following is about extortion and about political theatrics. While this resonates with earlier debt ceiling debates, this time there are enough people in the Republican House majority who may be willing to test the problems that would transpire after a breach of the ceiling.
Mr. McCarthy’s argument goes something like this: “We, the Republican majority in the House, will only approve something that is in our nation’s interest if you accede to demands to lower spending (but not touching increasing revenues). We don’t care about prior appropriations, not do we much care about a substantive debate of these important issues—we will just hold you hostage.”
PRESIDENT BIDEN, SAVE US FROM CATASTROPHE
This periodic farce should be ended. By all means, I hope that President Biden and Speaker McCarthy can come to a reasonable negotiated resolution that results in a reduction in spending and avoids going over the fiscal cliff.
But if an agreement that allows Mr. McCarthy to claim victory in this moment of political grandstanding on budgetary appropriations that already have been made, the President needs to act. In this event, in order to end the drama, President Biden should invoke the 14th Amendment’s requirement that public debts be honored. Here’s the pertinent language:
“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…”
This seems to say, in pretty unambiguous language, that the nation’s debts cannot be questioned. Our debts are to be paid. As the Lannisters (of Game of Thrones fame) would say, “we always pay our debts.” Section 4 doesn’t say that public debts shall not be questioned, “except when the party questioning the debt is Congress.”
The debt ceiling should be increased, as a matter of course, every time spending bills are adopted. In fact, one might argue that each time there is a new appropriation, the debt ceiling by definition has been increased by a commensurate amount. We need to acknowledge and address the farcical and dangerous nature of this “debate” (which is more like an ill-conceived list of demands). Once the President adopts a more muscular view of the 14th Amendment, the burden shifts to Congress, which is free to challenge the President’s conclusion on constitutional grounds. Then the Supreme Court can decide this once and for all. In the meantime, we can pay our obligations.
WHY IT’S ABSURD
Once a debt is incurred, through Congressional appropriation and signature of the President, it is a public debt. The craziness of the “debt ceiling” is the creation of a fictional ceiling on the total amount of debt the United States can incur. The Republicans perceive this as a retroactive “do-over” of appropriations and revising those appropriations through brinksmanship. It’s not actually about addressing obligations already incurred. Forget the legislative negotiation and hog-trading that went on to enact legislation to spend money on programs that Congress itself approved. Now, grandstanding regarding “excessive spending” somehow presents the minority with the right to demand that prior legislation be reversed.
Bear in mind that NO ONE has suggested that the debt ceiling should not be raised. And no reasonable person expects that the ceiling will not be raised. The current edition of political kabuki is the opportunity to scream about the “excessive spending” previously authorized by Congress. However, in this debate, the Republicans only want to discuss reductions in spending and NOT increases in revenue. Some very reasonable increases in revenue include normalizing the absurdly reduced tax burdens on corporations a level more in line with other liberal democracies, bringing capital gains back to the 28% rate from prior Republican administrations (still lower than the rate on earned income), getting rid of the carried interest treatment (especially on hedge funds) and increasing the nominal tax rate on high earners that existed prior to their reduction (including additional tax brackets above the current max for those earning more than $10MM a year). Address these matters while discussing the profligate (and some might argue, inefficient) spending of the Trump and Biden administrations and there is something to talk about.
Holding the financial markets hostage and exposing the United States to higher interest rates on its debt, reduction in its credit, and threats to its position as the global reserve currency is dangerous brinksmanship.
Have a great day,
Glenn