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Wayne Post
  • OUR VIEW: Consequences of breaking the debt ceiling

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  • The economic risks of Congress’ game of chicken over raising the debt ceiling have been much discussed, with good reason.
    Defaulting on treasury bonds for the first time in history would cause interest rates to spike and global markets to tremble. Treasury could avoid default by making interest payments to bondholders, as some Republicans have suggested, and not paying other bills. But stiffing seniors dependent on Social Security checks, doctors who have treated Medicare patients or government contractors building roads, guarding embassies or supporting troops would be just as destabilizing. Either course risks sending the economy back into recession.
    But before it’s too late, leaders of both parties should also consider the legal ramifications represented by smashing into the debt ceiling. In the Senate, it appears a deal to solve the issue is close at hand. The House, which unveiled its own plan Tuesday, which includes repealing a new tax on medical devices and taking away lawmakers’ federal health care subsidies, is another matter. Their bill might not get Senate approval.
    Consider the legal requirements binding on the executive branch:
    - The president is required to spend the money appropriated by Congress.
    - The president is prohibited from raising taxes or fees unilaterally to cover government obligations.
    - The president is prohibited from issuing bonds that haven’ been authorized by Congress.
    So if the debt ceiling isn’t lifted, any possible action President Obama might take would be breaking one law or another.
    Complicating matters further is the Constitution. The 14th Amendment says that “The validity of the public debt, authorized by law… shall not be questioned.” The debts that come due this week were authorized by law. If Congress refuses to raise the debt ceiling so that Treasury can make those payments, is it questioning the “validity of the public debt”?
    Legal experts disagree on which of Congress’ orders would be more binding on the president, the instruction to pay the bills or the prohibition against breaking the debt ceiling. They disagree over whether the president has the authority under the Constitution to consider the debt ceiling illegal and ignore it.
    Just as murky is the question of how these laws are to be enforced. The House could impeach the president for ignoring the debt ceiling. The final interpretation of the 14th Amendment’s proscription would be up to the Supreme Court, which usually resists getting involved in disputes between the other two branches.
    These issues hinge on an element the public, which largely opposes raising the debt ceiling, doesn’t seem to understand. Raising the debt ceiling doesn’t give the government permission to spend more money. Congress has already spent the money, through annual appropriations and formulas written into law over decades.
    Page 2 of 2 - Those bills have come due, and we can afford to pay them. The debt ceiling is in the way, but raising it has always been more of a technicality than a policy.
    Republicans and Democrats can argue all they want about spending and debt. That’s what budget votes and elections are all about. But America must pay its bills, or face economic and legal consequences that are truly scary.
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