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Wednesday, July 13, 2011

Thoughts on the National Debt Ceiling, the 14th Amendment, and Defaulting on Debt.

There has been a recent argument floating around that the debt ceiling is a violation of the 14th Amendment's Public Debt Clause.  I wish to settle my thoughts concerning this manner and refute such claims of the unconstitutionality of the debt ceiling.

To begin with, my sentiments are exactly the same as those outlined by the constitutional lawyer and chairman of Cato Institute, Robert Levy, in his article "Defaults, Debt Ceilings, and the 14th Amendment" posted on Cato Institute's website, accessible by clicking on the following link:

http://www.cato.org/pub_display.php?pub_id=13297

I came to my conclusions concerning the 14th Amendment and the debt ceiling issue, which are the same as Robert Levy's, before reading his article for Cato, my conclusions being that the concept of a "debt ceiling" is not in and of itself unconstitutional based on the Public Debt Clause in the 14th Amendment.  Yet Mr. Levy's article helped clear some confusions I had and helped better explain to me the reasoning behind my and his decision on this issue.

Another website I consulted prior to reading Mr. Levy's article was the following, a PBS Newshour video interview describing what exactly a "debt ceiling" is and why this issue is important, featuring Benyamin Applebaum of the New York Times.  This interview and the its transcripts can be found at the following web address:

http://www.pbs.org/newshour/bb/politics/jan-june11/debtceiling_05-16.html

Now to begin explaining my sentiments on this issue.  According to the PBS interview, a debt ceiling is a "a ceiling, a cap, or a limit" on the amount of money the federal government can legally borrow, or rather, go into debt.  For when one borrows money, such borrowing automatically brings the borrower into debt, specifically, into the debt of the creditor who was willing to loan the money to the borrower.  Thus borrowing money automatically puts an individual in debt until the borrower can pay the loan off.  Mr. Applebaum, in the PBS interview, relates a debt ceiling to a credit card limit.  He states, "It's as if it [the Federal government] has hit the limit on its credit card. Yours might be $5,000. Theirs [the fed. gov.'s] is $14 trillion."

Thus, a debt ceiling is a cap or limit on how much the federal government is allowed to borrow and thus go into debt.  That limit is currently $14 trillion, an amount that is almost impossible to wrap one's head around and imagine in real life.  Yet it is what it is.  And the argument by the Obama Administration, including the Secretary of the Treasury, as well as some Republicans and many Democrats is that in order to pay off our debt, we need to raise the debt ceiling from 14$ trillion to some larger unknown amount.  Many Republicans and Libertarians, and possibly a few Democrats oppose this proposal as a way of paying off our debt because it would put us even further into debt, not officially paying off the debt but just extending it even more, a larger amount to be paid at some undefined point in the future.  Essentially, raising the debt ceiling would mean borrowing more money to supposedly pay off our current debt.  Such a proposal would merely replace one portion of our debt with a new debt that was borrowed in order to pay off the current debt.  We would still be in debt wether the debt ceiling was raised or not.  And such a proposal would only allow the federal government to continue it's borrowing and spending spree, not holding it accountable to the consequences naturally brought about by it's reckless financial behaviors we have seen over the last few decades.  the American people must be held responsible for it's financial situations, so why shouldn't the federal government be, right?  The American people have a limit to how much they can borrow and spend, also know as a budget, so why shouldn't the federal government?  The American people are the not the money tree of the federal government from which the government can go out and perpetually pick off dollar bills and spend them.  Because the American people have limits in their finances, so too does the government.

Having established what exactly a debt ceiling is and why some want to raise it and why some do not, let's look at why the concept of a debt ceiling is not in and of itself unconstitutional in the context of the 14th Amendment's Public Debt Clause.  The 14th Amendment's Public Debt Clause states, "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."  As explained by Robert Levy in his aforementioned article, "That 1868 provision was intended primarily to prevent repudiation of Civil War debts. But the Supreme Court in Perry v. United States (1935) held that all federal debt is covered: The constitutional text "indicates a broader connotation. ... [It] applies as well to the government bonds in question, and to others duly authorized by the Congress."   This clause merely means that the U.S. cannot default on, or refuse to acknowledge and pay its legal debt.  Such legal debt stands and must be paid in whatever way the federal government can.  In and of itself, a debt ceiling merely places a limit or cap on how much money the federal government can borrow and thus extend the nation into debt.  A debt ceiling doesn't state that the government cannot or must not pay its debt.  And in only one context could such a connotation be made, as laid forth by Robert Levy.  Such a context would be that every other means of paying off said public debt was either illegal or financially impossible, leaving only further borrowing (and thus debt) as the only means of paying off the public debt.  If such a context were existent, and the debt ceiling was in place, in order to prevent further borrowing to pay off the debt, then yes, it could be construed that such a debt ceiling would be unconstitutional, according to the 14th Amendment.  But such a context is not in existence, neither now nor in the past, and there are many means of paying off our current debt still available to the use of the government.  Robert Levy writes, "Accordingly, a debt ceiling is constitutional as long as other funding is not statutorily barred. That means, of course, Congress and the president would be compelled either to reduce spending, raise taxes, sell the Treasury's mortgage-backed securities ($100 billion) or gold ($389 billion), delay principal and interest on debt held by the Federal Reserve (16% of total debt) or simply revalue the Treasury's gold certificates at the current market price (a gain of $378 billion) by amending the Par Value Modification Act. The choices to avoid default are numerous, notwithstanding a debt ceiling."  Being that other means of raising revenue and paying off the debt are still open to Congress, even with our current debt ceiling in place, the debt ceiling cannot be unconstitutional and raising the debt ceiling is not the only means of paying off our debt.  Indeed, in light of these facts, the urgent calls by the Obama Administration and Democrats to raise the debt ceiling to pay our debt or else face dire economic hardships and complete economic chaos ring utterly hollow and make them out to be demagogues using fear to lead the people in a direction they don't want to go, telling them to jump off a cliff when they clearly have no desire to.  My proposal is to raise taxes on everyone, not just on one portion of society, leaving the burden of decades of happy-go-lucky governmental spending on them, but placing the burden equally upon the entire nation since the entire nation was supposed to benefit from such spending.  I would also propose cutting spending immensely, targeting all areas where spending could and should be cut, even those sacred areas that would be political suicide to touch.  Are our politician's political jobs in government more important than the good of the whole of America?  I think not!  I would also call on the Federal government to start selling federal lands not in use and that are disposable. Anything we can do to start paying off the debt now instead of continually putting it off for future generations, all the while it continues to grow, I say we do it!  We must not allow the federal government to continue to borrow more and more money putting us further and further into debt, a debt that will be impossible for us to pay off, putting us in bondage to our creditors.  

Please hear reason, America, President Obama, Obama Administration, and Democrats!  We cannot a constitutionally and morally default on our debt, nor can we morally and practically continue to borrow and increase our debt!  Don't put off today what can and needs to be done today.  Will it be tough and hard?  Yes, but the results will be even more gratifying and the relief even more pleasant!