Debt Ceiling Hostage Taking: Section 4 Of The 14th Amendment Was Designed To Stop John Boehner
Kevin Drum is skeptical that the Obama administration would really be within its rights to ignore the debt ceiling:
Maybe I’m missing something here, but it strikes me that this doesn’t come close to implying that the debt ceiling is unconstitutional. What it really suggests is merely that the public debt is the only untouchable part of the federal budget.
Jack Balkin delves into the legislative history and shows why the 14th Amendment has a provision guaranteeing the debt in the first place. The sponsor of the provision, Benjamin Wade, wrote at the time:
[The proposed amendment] puts the debt incurred in the civil war on our part under the guardianship of the Constitution of the United States, so that a Congress cannot repudiate it. I believe that to do this wil give great confidence to capitalists and will be of incalculable pecuniary benefit to the United States, for I have no doubt that every man who has property in the public funds will feel safer when he sees that the national debt is withdrawn from the power of a Congress to repudiate it and placed under the guardianship of the Constitution than he would feel if it were left at loose ends and subject to the varying majorities which may arise in Congress.
Balkin explains:
If Wade’s speech offers the central rationale for Section Four, the goal was to remove threats of default on federal debts from partisan struggle. Reconstruction Republicans feared that Democrats, once admitted to Congress would use their majorities to default on obligations they disliked politically. More generally, as Wade explained, “every man who has property in the public funds will feel safer when he sees that the national debt is withdrawn from the power of a Congress to repudiate it and placed under the guardianship of the Constitution than he would feel if it were left at loose ends and subject to the varying majorities which may arise in Congress.”
Like most inquiries into original understanding, this one does not resolve many of the most interesting questions. What it does suggest is an important structural principle. The threat of defaulting on government obligations is a powerful weapon, especially in a complex, interconnected world economy. Devoted partisans can use it to disrupt government, to roil ordinary politics, to undermine policies they do not like, even to seek political revenge. Section Four was placed in the Constitution to remove this weapon from ordinary politics.
In other words, it’s in the 14th Amendment to guard against exactly what Congressional Republicans are doing right now.
Balkin does not suggest, nor do I, that the legal merits are open and shut. It’s certainly risky to take a flyer in the middle of a debt crisis. But if we do reach h-hour, we’re probably better off if the Treasury simply announces it’s going to continue to pay the bills and dares Republicans to take them to court than repudiating the debt, right?
Matt Steinglass argues that the Supreme Court would likely side with the Treasury:
If there’s one thing we’ve learned in the past 11 years, it is that the Supreme Court’s decisions on critical issues are very strongly influenced by political pressure. In a situation where the entire weight of world bond markets was bearing down on Anthony Kennedy’s head, would he really vote to crash the economy and destroy the credit rating of the United States? Would any individual do that? I don’t think even Eric Cantor would, if he were solely and publicly responsible for the decision. The ability of the GOP to push the government to the brink of default, and possibly ultimately over it, depends on the diffusion of responsibility: Republicans can only do it because they can hold Democrats to blame. It’s also driven by political vulnerability: Republicans have gotten themselves into a spiraling tea-party-driven political dynamic where they seem, on issue after issue, to be incapable of voting for any proposals that a Democrat might be able to accept, for fear of the consequences from their base. Anthony Kennedy does not have to fear a primary challenge, and if the United States’ ability to pay its debts comes down to his single vote, he’ll have no excuse. Maybe I have no idea how these things work. But I can’t see a Republican Supreme Court going toe to toe with the entire massed forces of Wall Street and not blinking.
A point that I think is worth drawing out here is that it’s not even clear the GOP leadership wants the power to take the credit of the Treasury hostage, or — more likely — if it’s simply been forced into this position by a financially uneducated base. Republicans in Congress might be relieved to have a deux ex machina absolve them of the need to walk a fine line between the demands of the base and the demands of their business constituency.
By: Jonathan Chait, The New Republic, July 1, 2011
Lucy, Charlie Brown And Football: The Politics Of Personal Grievance
Congressional Republicans all but dared President Obama to engage in a fiscal debate on their terms, demanding to know whether and how he’d tackle long-term debt reduction. The president agreed and presented a credible, realistic plan to cut $4 trillion from the debt over 12 years.
GOP officials obviously weren’t going to like his vision, but I’m a little surprised they’re still whining that Obama was mean to them.
The three Republican congressmen saw it as a rare ray of sunshine in Washington’s stormy budget battle: an invitation from the White House to hear President Obama lay out his ideas for taming the national debt.
They expected a peace offering, a gesture of goodwill aimed at smoothing a path toward compromise. But soon after taking their seats at George Washington University on Wednesday, they found themselves under fire for plotting “a fundamentally different America” from the one most Americans know and love.
“What came to my mind was: Why did he invite us?” Rep. Dave Camp (R-Mich.) said in an interview Thursday. “It’s just a wasted opportunity.”
Paul Ryan was reportedly “furious” and complained that the speech “was extremely political, very partisan.”
It’s worth fleshing this out, because there are some important angles to keep in mind.
First, the Republicans’ politics of personal grievance is based solely on their hurt feelings. They’re not saying the president lied or that his numbers don’t add up, but rather, they’re outraged that Obama was a big meanie. That’s kind of pathetic, and it reinforces fears that the House GOP majority is dominated by right-wing lawmakers with temperament of children.
Second, exactly what kind of reaction did Republicans seriously expect? Their fraudulent and callous budget plan, approved yesterday despite bipartisan opposition, eliminates Medicare. It punishes the elderly, the disabled, and low-income families, and rewards millionaires and billionaires. It calls for devastating cuts that would do widespread damage to the middle class and the economy. Were Republicans seriously waiting for Obama to politely pat them on the head and say, “It’s OK, you tried your best. I’ll give you an A for effort”?
Third, why is it Republicans expect one-sided graciousness? They expected a “peace offering” after pushing their own plan that was “deliberately constructed to be as offensive to Democrats as it’s possible to be,” and didn’t even bother with insincere “nods in the direction of bipartisanship.” I’ll never understand why Obama is expected to be conciliatory with those who refuse to do the same.
And finally, having a debate pitting two competing visions isn’t a bad development. Greg Sargent’s take on this rings true.
Throughout the first two years of Obama’s presidency, leading Republicans have regularly claimed that Obama is taking America towards socialism. Yet when a Democratic president stands up and aggressively defends his vision and worldview, and contrasts it sharply with that of his foes, something’s wrong. That’s not supposed to happen.
Obama’s characterization of the GOP vision was harsh. But so what? Politics is supposed to be an impassioned argument over what we all think the country should be. Is it possible to cross lines? Sure, but Obama didn’t cross any lines — in fairness, neither has Ryan — and no one was blindsided. No one was the victim of any sneak attack. We should want politicians who think their opponents’ worldviews are deeply wrongheaded to be free to say so in very vivid terms. Otherwise, what’s the point of it all?
I’d add just one last point. For two years, Obama pleaded with Republicans to play a constructive role, work in good faith, and compromise. They refused. Lucy doesn’t get to complain when Charlie Brown doesn’t want to run at a football that’s going to be pulled away anyway.
By: Steve Benen, Washington Monthly, Political Animal, April 16, 2011
How Quickly We Forget: Dick Cheney, “Deficits Don’t Matter”
Sure, it’s huge, but big deficits don’t always lead to bad economic health. As we found during The Great Depression, the opposite is also true.
For those worried about the future, huge federal deficits remain the gift that keeps on giving, or taking, depending on your point of view. They are always around, always huge, and seem to be an issue that neither party has immunity from.
If you care to bash Republicans over this issue you need look no further than former Vice President Dick Cheney who told former Treasury Secretary Paul O’Neill that “deficits don’t matter” when the latter voiced concerns about the size of the federal bill. Cheney later fired O’Neill, presumably for thinking deficits actually mattered.
Still, Cheney was true to his word, as the White House of George W. Bush raised the federal deficit every year it was in office. When Bush started his presidency, the national debt as a percentage of gross domestic product hovered at 60%. By the time he exited, it was closer to 80%. Surely the first part of President Obama’s term will see that ratio only rise further, as the federal government fully deploys the $700 billion Troubled Asset Relief Program, the $200 billion Term Asset Backed Loan Securities Facility and the $500-$1 trillion Public-Private Investment Program, among other alphabet soup bailouts.
Of course, to critics of Obama, including conservatives, now deficits do matter a lot more than they did a year ago. Look no further than the well-covered “tea parties” to see an instance where partisanship has seemed to trump fiscal stewardship, or at least short-term memory.
By: David Serchuk: Article originally posted August 5, 2009, Forbes.com
It’s Not Just Entitlements, The Real Issue: Controlling All Health Care Costs
The current cry to reduce Federal deficits and debt growth by reducing Medicare and Medicaid entitlements is totally missing the key issue: the need to moderate all health care inflation. This should be the time for a national debate on how to best tackle the underlying cost problem, for the sake of our future, the economy, and access to health care.
The June 13-19, 2009 Economist editorialized: “America has the most wasteful [health] system on the planet. Its fiscal future would be transformed if Congress passed reforms that emphasized control of costs as much as the expansion of coverage that Barack Obama rightly wants.”
Health reform failed to get an adequate handle on all health care costs. Now there are constant calls by various expert commissions and many in Congress for entitlement spending reductions. Such cuts will create enormous new problems by failing to address the underlying, real problem of health costs and inflation.
Cutting just Medicare and Medicaid without addressing the whole problem is like squeezing a balloon—the balloon starts looking very strange very fast. While it is difficult to tell how much cost-shifting may occur and it will vary from market-to-market, some Medicare and Medicaid cuts probably get passed through in higher costs to the private sector—hardly a helpful action. (Congressional Budget Office, December 2008, Key Issues in Analyzing Major Health Insurance Proposals, p. 116) Cuts that are too deep in Medicare will also end up causing providers to be reluctant to see seniors and people with disabilities—as happens all too often today in Medicaid. In time, quality may be threatened.
And Medicare and Medicaid are not particularly driving the problem of soaring health care costs. As various studies have shown, over the long haul, Medicare has probably inflated slightly less rapidly for a comparable package of services than the private sector has. Recent reports by the Medicare Payment Advisory Commission (MedPAC) show that high quality, efficient hospitals have made a little money on Medicare, while private insurers have often failed to control costs, and have paid less effective hospitals 132 percent of the costs of running an efficient hospital. (See, for example, MedPAC’s March 2009 Report to Congress, Section 2A.)
A Comprehensive Approach To Health Care Cost Containment
It is past time for a comprehensive solution to ensure the affordability of a fundamental need: access to health care. We should say that access to reasonably affordable health care is a basic national need, like access to clean water and air, and treat it like a regulated utility—like your water–where cost growth is kept within a reasonable range and where a reasonable quality service is widely available (but if you want to go buy Perrier, you can).
Instead of squeezing one part of the health care cost balloon (Medicare and Medicaid), we need an “all saver” system. Under this system, any provider in the health care sector which inflates its billings faster than the growth in the CPI plus, say, one percent (adjusted for changes in population, new technologies, increased productivity, and changes in the severity of the cases that provider treats) would owe a rebate of the excess amount to its customers—both private and public. If the rebate were not provided, that excess income would face a 100 percent tax. The Federal government could do this under the Commerce clause, or, to enable providers and patients to opt out, could require participation by those accepting payment from Medicare, Medicaid, and payers claiming tax-deductible medical expenses.
How would the plan work? Complicated? Yes, but soon very doable with today’s health information technology systems and the coding systems developed by Medicare and others. It would take several years to set the system up, but it would work like this. Let’s say a hospital in a base year of 2013 had $100 million worth of billings. If consumer inflation were 4 percent and if the system allowed another 1 percent (just because we do highly value health care and some extra growth is a reasonable choice), then in 2014, the hospital could bill $105 million. (Let’s assume that an expensive new technology is available that costs an extra $1 million, but let’s also assume that increase is coincidentally offset by a national increase in productivity of 1 percent that saves about $1 million.)
If the hospital bills its customers $110 million in 2014, yet those customers are no sicker or more complicated to treat than in 2013 (as proven by the audited billing codes or adjusted for coding creep), the hospital will owe its customers $5 million in rebates. If Medicare paid 40 percent of the bills ($44 million), it would receive back 40 percent of the $5 million excessive inflation ($2 million). If a large employer’s health plan paid 20 percent of the provider’s bills, it would get $1 million back, and so forth.
If a provider did not want to participate, they could insist on only after-tax cash customers, and individuals would be free to use such doctors and hospitals.
Changing The Debate
Instead of focusing on Medicare/Medicaid cuts, Congress should be debating ideas of how to moderate all health care spending while minimizing interference in the practice of medicine. The plan I’ve described is just one option, and of course it would have to be adjusted to deal with many complexities. For example:
- How could the plan be made fair to new doctors and facilities with one-time extra start-up costs and no history of billings?
- How could the plan use quarterly payments or rolling averages to avoid many providers shutting down in December?
- How could society encourage further innovation, perhaps by offering more inflation for drugs certified as breakthroughs by the Food and Drug Administration?
- What cosmetic-type services could or should be exempt?
- What MedPAC-like advice and constitutional governance would be best?
Of course, if over the next decade reforms such as electronic medical records, comparative effectiveness research, and new bundling of the way we pay for services sufficiently ‘bends’ the spending curve downward, this system could be suspended. But it is doubtful those changes will do enough, and it is time to act on a comprehensive solution.
Incidentally, slowing all health care inflation would not only save enormous amounts in Medicare and Medicaid; over time it should achieve huge extra CBO/Joint Tax scorable savings, because the private sector and individuals will claim less in tax-deductible expenses for health care.
Budget reform that gets a handle on all health care inflation will solve most—or at least the toughest–of the ‘entitlement and future debt problems facing the nation. The entitlement problem is overwhelmingly a Medicare problem, driven not so much by more seniors or an aging population as by constantly soaring per capita costs of care. If we try to solve the entitlement problem just by cutting Medicare and Medicaid, we will destroy those programs. We need a total solution, because soaring health care costs are distorting the economy and our future as a successful nation.
Now is the time for this debate.
By: William Vaughan, Health Affairs Blog, Originally published March 3, 2011
The “Deficit Problem” Isn’t Financial: It’s Political
The federal budget deficit and its cumulative cousin, the national debt, are much more political and media phenomena than they are financial. Which isn’t to say that they don’t exist. Obviously, they do. But they have been invested with apocalyptic significance mainly for political purposes: to scare people and to coerce them into reducing the size and the scope of government.
The truth is that massive deficits are almost exclusively a Republican creation. But Republicans were conspicuously silent in the decades of their big run-up, when the deficits were providing the hollow illusion of easy prosperity. The other truth is that it is only deficits that can get the economy out of the ditch that Republicans left it in when Bush slunk out of office.
But as Republican Senate leader Mitch McConnell has said, “Our first priority is to make sure Obama is a one-term president.” That is the real reason Republicans are born-again fiscal fundamentalists: deficits are the only thing that might actually turn the economy around and that is exactly what the Republicans are so intent on avoiding.
The first tip-off about the fake hysteria surrounding the deficits is that all the Chicken Littles crying the end of the world were silent when the real run-up was being conducted. Look at the history.
Ronald Reagan inherited a national debt of $1 trillion. He cut taxes on the rich and exploded government spending so that in just twelve years, by the end of the Bush I administration, the debt had quadrupled to $4 trillion.
Where were the Nervous Nellies back then? And Republicans have apotheosized Reagan into some kind of secular saint, a totally schizophrenic adulation if we are to believe their current hair-on-fire shtick about the toxicity of debt.
Bill Clinton reversed Reagan’s supply side economics. He raised taxes on the wealthy and cut government spending to the lowest percent of GDP in 40 years. As a result, he paid down the deficit every year he was in office, even delivering a budgetary surplus in each of his last three years. He handed a $136 billion surplus to George W. Bush in 2001.
If Republicans were truly sincere about their putative religious aversion to deficits, they would idolize Clinton, who paid them down, and demonize Reagan who ran them up. It says everything about their honesty that they do exactly the opposite.
Bush II, of course, returned to the same voodoo economics that Reagan and his father had embraced. He aggressively cut taxes on the rich (his “base” as he called them) and exploded government spending. He ran deficits every single year of his presidency, doubling the national debt in only eight years.
Again, where were the Heraldic voices of doom when their country really needed them? They were nowhere to be found. In fact, Bush’s vice president, Dick Cheney, brushed off Treasury secretary Paul O’Neil’s concerns about the hemorrhage with his famous dictum, “Deficits don’t matter. Reagan proved that.” Remember?
So, the choice to get all apoplectic about government borrowing is exactly that — a choice, and a political one at that. It is a choice Republicans conveniently never invoke when the deficits are their own, as they almost always are. Again, look at the history.
A Republican has occupied the White House for 28 of the last 42 years and never once in all of those years did any one of them ever produce a single balanced budget. Not once. They are financial phonies. Fiscal frauds.
And how ironic is it that these same Cassandras who are prophesying the end of the world are just as adamant that Bush’s tax cuts for the very rich must be preserved at all costs. Over the next ten years, those tax cuts will cost the government $700 billion in lost revenues, a seven hundred billion dollar, dollar-for-dollar increase in the deficit.
So, they can’t have it both ways. If the deficits do, in fact, pose an existential threat to the republic, then the government had better bring in more revenues from whatever source it can. But it looks like the deficits aren’t quite so onerous that we should bring in revenues from the only source that could actually pay them, the very rich. Funny thing, huh?
It is this duplicity on both history and policy that so clearly betrays Republican hypocrisy. They’re not interested in reducing deficits. They’re interested in reducing the size, the scope, and the efficacy of government, for government is the only agent left in the country with the capacity to stand up to the big corporations, to stop their sociopathic looting of the economy and their suicidal predations on the environment.
Republicans are also determined to undermine, even destroy, anyone who stands in the way of their agenda. Scott Walker, governor of Wisconsin, is the archetypal poster-child for this role.
Wisconsin’s legislative fiscal analyst had reported that the state had a $120 million surplus before the governor gave $140 million in tax breaks to corporations. So now, being shocked — SHOCKED — to discover a deficit, Walker claims he needs to dismantle public sector unions.
It’s like that iconic parable describing chutzpah: the child who kills his parents and then throws himself on the mercy of the court because he’s an orphan. But wait! It actually gets worse. The unions responded with substantial give-backs to help control the state government’s costs. Walker’s response? He’s not interested.
You see, the deficit is not, in fact, the problem. It’s just the fiscal train wreck that Republicans, from Wisconsin to Washington, have engineered to justify dismantling the social safety net and breaking the resistance of those people who will not submit themselves to living as serfs.
Finally, beyond the sham of their real history, beyond two-faced policies, there is the simple, conveniently overlooked matter of economics itself.
Ninety percent of the Obama deficits can be traced directly to actions of the Bush administration that carry over to the present. These include two sets of tax cuts for the rich, two seemingly unending wars, a $600 billion give-away to the pharmaceutical industry, and The Greatest Economic Collapse Since the Great Depression. That is what Obama inherited from Bush, together with a $1.3 trillion deficit. Again, look at the data.
Bush’s Great Recession started in December 2007, 13 months before Obama took office. In January 2009 when Obama was sworn in, the economy was losing 780,000 jobs a month. A month later, in February 2009, he pushed through a $787 billion stimulus package. Job losses bottomed out two months later, in April, and by November the economy was not only not losing jobs any more, it was creating them.
Did the turn-around require deficits? Of course it did! The economy had imploded and Bush was only too happy to toss the turd to his successor. And where else was the impetus going to come from to actually re-start demand? The alternative would have been an accelerating death spiral into complete economic collapse. We did that once under the tutelage of Republican economics. It was called The Great Depression.
Now, to be sure, the current recovery is fragile. Eight million jobs were lost in the Bush Recession. They haven’t been replaced. Eight trillion dollars of home equity was destroyed and it may not be replaced for decades. Fifty million people are living in poverty. Consumer spending makes up some 70% of the economy. So, as long as consumers are so battered, spending is going to be weak.
And businesses are certainly not taking up the slack. Though their balance sheets are glutted with some $2 trillion made from shifting jobs to China, investment in the U.S. economy as a percent of GDP is at 12%, the lowest it’s been in the last 40 years.
Are Obama’s policies beyond reproach? Not by a long shot. He should have pushed for a much larger stimulus package and not caved to Republican demands to extend the Bush tax cuts. He shouldn’t have gone along with Bush’s larcenous give-aways to the banks and should have done much more to constrain the soaring costs of health care which are the real source of the economy’s debt problems.
But right now it is federal government spending that is keeping the economy afloat, the more so as states and cities, which cannot run deficits, are cutting their spending. In fact, the surest way to sink the economy would be to pull the plug on federal government spending. Which says more about the real motives of the latter-day deficit hawks than all of their insufferably strident sanctimony combined.
Yes, in the long run, the debts will have to be repaid. But the best way to assure that that can happen is to get the economy moving again, to get people working and paying taxes, just like Roosevelt did the last time Republicans drove it over a cliff. But rebuilding is going to require some deficit spending, at least in the short run.
Republicans don’t abhor deficits. They love them. That is the real “money-where-your-mouth-is” truth that all of their pious posturing cannot disguise. Their own history couldn’t be more persuasive on that point. What they abhor is deficit spending that will help the economy on a Democrat’s watch. Their aversion to deficits isn’t economic, it’s political. And their motives aren’t exemplary. They’re despicable.
By: Robert Freeman, CommonDreams.org, originally posted February 27, 2011
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