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The USA Defaults - on Its Constitution (Again)

Throughout these last few weeks, everyone involved in the negotiations on funding the government and the debt ceiling should have been repeating something over and over again - to the point that the American people should be sick of hearing it.

It is Section 4 of the 14th Amendment to our Constitution of our great nation. (I choose still to use the word "great" because I don't identify this nation with its government.)

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

Compare and contrast with the President's comment of a week ago: "As reckless as a government shutdown is ... an economic shutdown that results from default would be dramatically worse" or the opening of his address to the nation a couple of days later, in which he talks of meeting "Republicans and Democrats from both Houses of Congress in an effort to ... remove the dangers of default from our economy."

Let's be clear.

If anyone who has sworn an oath of office to uphold the Constitution would threaten any default by the USA when the USA has a) the revenue to meet the interest obligations on its debt and b) (for shame) the ability of a sovereign issuer of its own currency to pay all its debts at any time c) seen this coming for ages, and therefore had plenty of time to prepare for it, then he is doing little other than threatening willfully to violate his oath.

The credit of the USA should never have been in question and never had to be. As all of this nonsense of the last couple of weeks has been going on, everyone involved should have been repeating that part of the 14th amendment out loud, reiterating that all debts would be paid first out of government revenue simply because that is the supreme Law of the land - and because, therefore, their integrity as takers of the oath to uphold the Constitution would not allow them to threaten impeachable behavior for political ends - or, for that matter, for any ends whatsoever. Their priority would then have been to put in place the practical mechanisms for ensuring that would be done.

As a writer and speaker who loves my country and therefore the Constitution (or should that be the other way around?), I spend plenty of hours spreading the dangers of the monarchy that the American Presidency has become, as it deploys and expands power through Executive Orders. But there is just about one kind of executive order that I believe my patriotism would compel me to accept: that being an order that simply restates a part of the Constitution verbatim and the President's intention to defend it. Had President Obama told us he would be prepared to issue an executive order that reiterates the 14th Amendment to ensure that the Constitution would be followed throughout this "crisis", then the last two weeks would have been very different.

Not that the President has displayed any less leadership than anyone else on or around Capitol Hill.

Section 5 of the 14th Amendment states simply,

"The Congress shall have power to enforce, by appropriate legislation, the provisions of this article".

And that is what it should do. In particular, only Congress has the power to undo the two laws without which there would be no debt-ceiling crisis. They are the Second Liberty Bond Act of 1917 that establishes the debt ceiling, and the Federal Reserve Act that (broadly speaking) prohibits the Fed from lending directly to the Treasury.

If Members of Congress find themselves negotiating in a crisis that arises from legislation that cannot be violated without violating the Constitution, then their first order of business, should they take their oath seriously, must be to revoke, repeal or suspend the offending laws, or to pass further law that makes the "offending laws" benign. To put (or leave) the President in a position where he would have to violate law to follow the Constitution is to be no better than the President who would shrug off the same Constitution.

Rather than do the right thing by making any serious attempt to deal with the legislation that is the sine qua non of the debt-ceiling crisis - a predictable and repeating crisis that is becoming increasingly like a kabuki theater version of Ground Hog Day - House Republicans not only made no effort to attack the offending legislation but happily exploited it in an apparent attempt to extract ever-decreasing party-line concessions that concerned initially almost everything in their party platform, later just a few bits of the Affordable Care Act, and finally next to nothing at all.

Any credibility that this strategy didn't remove from the GOP was pretty much lost when it chose cynical parliamentary maneuvering in the form of covert rule-changes to help them get as much political mileage out of the whole mess as possible. The ultimate result was nothing worth speaking of - except the concentration (yet again) of even more power in the hands of fewer people in the House. Nice job, guys.

Lest anyone think that my beef is just with the Republicans, it isn't. The problem that precedes all of the foregoing is actual spending , without which there can be no debt, without which there can be no "debt-ceiling crisis". The Democrats have been in recent times even more culpable than the Republicans in legislating spending above the standing debt limit. In March, the Democratically controlled Senate rejected the $3.5T Republican budget, which at least made some (albeit too little) attempt to rein in deficits, to pass $3.7T of spending, knowing full well that it was spending money that on current law (with the debt-ceiling where it was), America could not cover by borrowing, even though it was not covered by revenue. To say that spendthrift legislators were counting on the rise of the debt ceiling is, rather, to make my point for me, for if the debt limit means anything at all, it is as a constraint on the spending of money in the first place. If a Member of the House or Senator votes for spending while knowing that it will eventually trigger a(nother) debt-ceiling crisis a few months down the line, he rather loses any moral basis for accusing anyone who voted against that spending for triggering the crisis when it finally happens.

The legislature knows the cause of these repeated debt-ceiling debacles - because it created it. The predictable, repeating crisis, which does nothing to help the American people, can only be sustained if our leaders see it as serving them in an important way - which, of course, it does. The notion that there is such a thing as a debt-ceiling provides a fig leaf for a fiat monetary system that allows government to spend without constraint and without taxpayers' feeling the immediate economic costs of that public spending, which instead, are felt over time through inflation. (In summary: politicians benefit now; people suffer later.) In such a system, the donkeys gain the political benefit of appearing to help their Constituents by social and economic engineering without economic constraint, while permitting the elephants to gain the political benefit of doing exactly the same thing when it suits them, or (as now) appearing to be upset when the donkeys overdo it.

Truly, it is a pox on both their houses.

History shows that the so-called "debt ceiling" does not constrain our government at all. Only the Constitution and the integrity of those who swear to uphold it can do that. If our government spent in pursuit of only what it is authorized to do, then the debt-ceiling would take care of itself, because American government spending would be nowhere near it. (And, as a bonus, we would still have due process, privacy, and the respect of other nations who would not see us as aggressors - because violations of all of those things are expensive.)

Put simply, public spending or the size of government is the long-term issue from which the debt-crisis is - ironically and conveniently for career politicians of both parties - the short-term distraction.

Clearly, the most serious debt in Washington has rather less to do with Treasury bills and social security checks than with the accumulated deficit of commitment of our leaders to their oath. No need to panic, though: we are not close to a ceiling on that. Washington D.C. defaulted on it years ago.

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Excellent and sound exegesis of a casus belli!

But more than a cause for conflict, though I have no doubt that the present perfidy stands at least equal to that the founders were compelled to resist, we see in this explanation a shocking and frank diagnosis.

The prognosis of this condition is a terminal outcome for the nation.

The worm of infection has not begun with the elected servants who have so evilly forsaken their oaths, become oath breakers, and imperiled the ship of liberty and state. No, this infection is a direct outcome of the malaise and disease which has overcome the once free people who live in their respective precincts. They have fallen far into the many results of the 'sin of mankind', greed, lust, pride of life!

In the end they will be accounted as the most responsible!

In this ending, as the last great transfer of their wealth winds down into a collapsed money system, they are becoming serfs... serfs with cool toys, but serfs nonetheless!

Robin Koerner's picture

Thank you

JSBach -

We met at the annual WA RLC conference and haven't spoken since. Perhaps we should?

Very best!

Defaulting vs. Questioning Validity

Say I have a car loan. Then I lose my job. Given my other expenses, I decide paying my car loan is the lowest priority, so I don't pay it.

By not paying, am I claiming that my loan contract is void and I no longer owe payments? Or that the lender does not still hold the title and can not repossess the car? Am I claiming the debt is not legitimate, not valid?

Maybe it's a question of terminology. The 14th Amendment says "the validity of the public debt...shall not be questioned". Does the word "validity" have a special definition in the context of financing?

How is defaulting on the debt being taken as questioning the validity of the debt?

Robin Koerner's picture

Your point...

... is well taken and fair....

And certainly, it is perfectly logical to not pay or service a debt when you have no money except perhaps what you need to survive, while acknowledging that the debt is valid and must be paid.

BUT that is not the case for the USA as sovereign state. Since the USA CAN pay the debt, if it chooses not to, then it is de facto changing the terms of the debt (i.e. invalidating what terms prevailed) because the choice not to honor it is just that - a choice. In such a situation, an action to default is to invalidate it (if not the debt, then the terms of the debt, if that is even a difference) unilaterally and by one's actions, which speak louder than one's words.

Moreover, even if one argues that such a default were not "questioning validity", it would certainly call into question by creditors that validity... which seems to me to be a willful act that necessarily leads to violation of the amendment...

I am not de facto changing

I am not de facto changing the terms of my car loan when I miss a payment. A judge is not going to say, "well, you've effectively changed the terms of your loan by failing to pay this month, so the original contract is no longer valid and the car is yours!" A loan is still "valid" (legally binding) regardless of whether you pay on time.

For the US to default on its current loans does not declare those loans invalid (not legally binding) even if it discourages creditors from further lending. The consequence of a damaged credit rating is irrelevant.

The 14th Amendment says the validity shall not be questioned, so even the US defaults, the debit is still valid and the US still owes it. What it really does is bar the US from repudiating the debt.

Robin Koerner's picture

I agree that a judge would

I agree that a judge would not accept your de facto changes to the terms of a loan payment if you were to miss a payment.

But I think you are making the same distinction I am trying to make, although for different purposes: what you do and what you declare are not the same thing.

I am saying that if "validity" or (any other word) in the Constitution affected only what you declared to be the case, but not what you did, then it would be essentially meaningless: I.e. if you willingly do something, it is not changed by a declaration that one cannot have done it.

Put another way, when one violates a contract, the matter of substance is the violation - which is not changed by the fact that you then go to court acknowledging that there is a contract that you SHOULD be keeping to.

Imagine you are contractually obliged to do something. Sure, you can say "this contract is valid" while violating it... but I am saying that if you are showing (through action) and declaring (through statute in this case) that you may violate such a contract unilaterally when you don't have to violate for reasons of impossibility of fulfillment, then of course you are questioning the validity of the contract: you're questioning the validity of the very idea of contract, in fact. And that would be the case even if you *say* that the contract is legally binding. In summary, to say "this contract is legally binding but I choose not to be bound by it" is to question validity. That is my approach in this article.

Sure, this is not an argument for a courtroom - and I understand your point (and we can also argue about the meaning of the word "questioned") ... but if the 14th amendment was to restrict only what we "believe" or said about our debt, and not our actions with respect to our debt, then I fail to see what purpose it serves... I don't think any Constitutional amendments are themselves just declarative, after all!

I do appreciate your point

I do appreciate your point about saying versus doing. However, I'm afraid this argument is applying a presumed or inferred intent of the 14th Amendment rather than the plain meaning of the words it actually contains. It also requires judgement of whether default was avoidable. Right, I think it's a bit weak for a courtroom, and if we are talking about a trial on impeachment, that's important.

If this clause does nothing more than bar the US from repudiating its debts, but does not guarantee against default, what good does that do? Well, it seems like it would avoid ill will and possible war with burnt creditors. They probably won't invade us if payment comes late one month because they know the debt is still valid under our own laws. They also know we can't repay if we're all dead, let alone pay late fees or borrow more tomorrow. On the other hand, if we take their money and then denounce obligation to repay outright, they might indeed declare war.

Between these perhaps is where the US publicly profess the validity of its debt while secretly and deliberately avoiding payment period after period. In that case creditors have the greatest power of correction: they can just stop buying our debt.