Wednesday, June 29, 2011

The 14th Amendment: Conservatives new biggest enemy (VIDEO)


As Republicans continue to press the issue of not raising the debt ceiling, Democrats are looking at other options to prevent default.  Defaulting on our obligations could cause a global calamity and would severely hurt America’s AAA credit rating…a rating imperative to the world’s economy, as the U.S. Dollar is the international standard.

Their new solution?  Informing Republican’s that the debt ceiling itself is unconstitutional.

 How is that for turning the tables on the “Constitutionalists?”

For those of you not familiar with the 14th Amendment, Section Four reads as follows:

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. But neither the United States nor any state shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

Pay special attention to the first line.

“The validity of the public debt of the United States, authorized by law…shall not be questioned.”

Seems pretty straightforward, no?

"This is an issue that's been raised in some private debate between senators as to whether in fact we can default, or whether that provision of the Constitution can be held up as preventing default," Sen. Chris Coons, D-Del., told The Huffington Post.  "I don't think, as of a couple weeks ago, when this was first raised, it was seen as a pressing option.  But I'll tell you that it's going to get a pretty strong second look as a way of saying, 'Is there some way to save us from ourselves?'"

This problem is stemming from arguments between Republican’s and Democrat’s on how we should attack the debt problem facing this nation.  Republican’s only want to cut spending, which Democrats are in agreement on, and refuse to address revenues.

We need to take a balanced approach.  We cannot only look at one side of the issue.  I am sorry, but large oil companies do not need subsidies…subsidies are for companies that need subsidized.  Big oil doesn’t need any more help.  And we certainly don’t need subsidies for corporate jets.  

What the hell is that all about?

Thing is, most Democrats aren’t asking for a tax raise, much to the chagrin of many progressives.  Most are willing to just eliminate some of the many loopholes that drive down the effective corporate tax rate to unreasonable levels and end some deductions for the super-rich.

How is this not reasonable?  Only cutting spending will severely hinder economic development.

The Huffington Post notes that by declaring the debt ceiling unconstitutional, the White House could continue to make its financial obligations, leaving Tea-Party-backed Republicans to debate the constitutionality of the plan…a very difficult prospect.

If President Obama decided to take this route, his actions would be backed by a Supreme Court decision in 1935, which stated that the amendment clearly referred to all federal debt.  The Huffington Post also noted that congress would have a hard time defeating this decision, as the senate would most likely block any attempt.

 "While [the 14th Amendment] was undoubtedly inspired by the desire to put beyond question the obligations of the government issued during the Civil War, its language indicates a broader connotation," the majority wrote in Perry v. U.S.  "We regard it as confirmatory of a fundamental principle which applies as well to the government bonds in question, and to others duly authorized by the Congress as to those issued before the amendment was adopted.  Nor can we perceive any reason for not considering the expression 'the validity of the public debt' as embracing whatever concerns the integrity of the public obligations."

Huffington Post contributor Ryan Grim notes that because the government borrows based on its full faith, “congress doesn’t have the authority to undermine that confidence by reneging on its obligations to its lenders.”

The court’s opinion, delivered by Chief Justice Charles Evans Hughes, confirms this.

"To say that the Congress may withdraw or ignore that pledge is to assume that the Constitution contemplates a vain promise; a pledge having no other sanction than the pleasure and convenience of the pledgor," read Hughes. "This Court has given no sanction to such a conception of the obligations of our government."

Having this debate is already dangerous to the markets.  It is one we shouldn’t even be discussing.  We need to pay our obligations, period.  Yes, we need to address future spending, but defaulting on past spending should never be an option.

Some wonder if the administration would even go down this road.  Grim notes that it’s a difficult choice, but if one has to make a decision between a financial crisis and a constitutional one, the latter becomes more appealing. 

Coons believes that ignoring the debt ceiling would inevitably produce a congressional reaction, and any actions dealing with the uncertainty could be volatile towards the markets.

"The consequences of [ignoring the debt ceiling] will produce a legislative response, and almost certainly a constitutional crisis -- a crisis of interpretation, if not fact," Coons said. "Unfortunately there's no way that that does anything except spook the markets."

Either way, there is no doubt that we have to pay our obligations.  It seems like everyone knows this, yet Republicans continue to play this dangerous game in a time when economic recovery is imperative and fragile at best.  Grim believes that President Obama using the 14th Amendment strategy could at least serve as a message to the markets to maintain stability.

“He would say we are going to meet our obligations per The Constitution, and we can continue having negotiations around the debt ceiling or we cannot have negotiations dealing around the debt ceiling,” said Grim.  “But it would be a signal to the markets that…we are going to meet our obligations.”

Author Jeff Madrick doesn’t think that balancing the budget should even be the main issue right now.  He points to the fact that the economy is in too much trouble and is sliding into another recession.  He believes that we need stimulus and jobs programs.  Madrick agrees with Mark Zandi, John McCain’s former economic advisor, in that we need to raise the debt ceiling or face another recession.

“A real showdown on this will mean higher interest rates…much higher interest rates…which will undermine the economy or a sharp cutback in government spending paying its bills, which in turn, hurt the economy,” said Madrick.  “I think as we get closer, the problems are going to start to show up.  Interest rates will start to go up if there is no agreement, and then Republicans have to put up or shut up.”

1 comment: