Debt | - Part 5

Jack Lew Takes on the Debt Ceiling Deniers

Treasury Secretary Jack Lew is testifying before the Senate Finance Committee on the debt limit and those who argue not raising it can be dealt with by prioritizing payments. A link to the CSPAN coverage can be found here, though other news outlets are covering it as well.

Understandably, he seems pretty irritated about all of this…

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Santelli: Guess Who Said This?

CNBC personality Rick Santelli shares some thoughts about raising the debt ceiling that were offered up on Capitol Hill back in March 2006 by a freshman Senator from Illinois.

It really is a pretty good speech but, obviously, you see matters like this much differently when you’re the party in power rather than when you have little or no power.

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More on the 14th Amendment

From Princeton University history professor Sean Wilentz come these thoughts (and a good deal of interesting background) about the potential use of the 14th amendment as justification for the White House unilaterally raising the debt ceiling.

Republicans in the House of Representatives who declare they may refuse to raise the debt limit threaten to do more than plunge the government into default. They are proposing a blatant violation of the 14th Amendment, which states that “the validity of the public debt of the United States, authorized by law” is sacrosanct and “shall not be questioned.”

Yet the Obama administration has repeatedly suppressed any talk of invoking the Constitution in this emergency. Last Thursday Jay Carney, the White House press secretary, said, “We do not believe that the 14th Amendment provides that authority to the president” to end the crisis. Treasury Secretary Jacob J. Lew reiterated the point on Sunday and added that the president would have “no option” to prevent a default on his own.

In defense of the administration’s position, the legal scholar Laurence H. Tribe, who taught President Obama at Harvard Law School, has insisted, as he put it two years ago, that “only political courage and compromise” can avert disaster.

These assertions, however, have no basis in the history of the 14th Amendment; indeed, they distort that history, and in doing so shackle the president. In fact, that record clearly shows that Congress intended the amendment to prevent precisely the abuses that the current House Republicans blithely condone.

What’s really ironic about this is that the debt related provisions in the 14th amendment stem from concerns over Confederate debt that arose immediately after the Civil War ended.

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On Debt Ceilings and Defaults

There appears to be some confusion about the relationship between not raising the debt ceiling on October 17th and the timing of a credit default, news outlets seeming to jump to the conclusion that one naturally follows the other and, in at least one case, immediately.

Not surprisingly, CNN jumps the gun a bit when opening with:

As the partial shutdown of the federal government enters its seventh day Monday, the countdown to a government debt default drops to ten days.

A debt default, if the debt ceiling isn’t raised by October 17th (i.e., ten days from now) was apparently based on these comments from the Treasury Secretary:

Treasury Secretary Jack Lew said on CNN’s “State of the Union” that the government risks more than its credit rating if the debt ceiling is not increased by Oct. 17. He dismissed suggestions that the government could avoid default by making only interest payments.

The Bloomberg report isn’t much better as the certainty expressed in the report’s title belies the carefully chosen words by the Treasury Secretary:

Treasury Secretary Jacob J. Lew said Congress needs to pass a debt-ceiling increase by Oct. 17 or the U.S. will be “dangerously low” on cash and risk defaulting on its payments.

“On the 17th, we run out of our ability to borrow, and Congress is playing with fire,” Lew said on CNN’s “State of the Union” today. “If they don’t extend the debt limit, we have a very, very short window of time before those scenarios start to be played out.”

“If the United States government, for the first time in its history, chooses not to pay its bills on time, we will be in default,” Lew said. “There is no option that prevents us from being in default if we don’t have enough cash to pay our bills.”

We are sure to hear more about this in the days ahead but, one thing seems certain, if not raising the debt ceiling by October 17th automatically leads to a default, someone should tell the Republicans because many of them don’t believe it.

Moreover, after reading all of the above a couple times, it’s easy to understand why.

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