— Rep. Jerrold Nadler (D-NY 8)
The recent dysfunctional debate and ultimately terrible compromise over the federal debt ceiling has left the nation disillusioned and despairing about the future. To make matters worse, while only beginning to absorb this massive body blow to our economy and social safety net, Standard and Poors (S&P) made the outrageous and unprecedented decision to downgrade the nation’s credit rating, though we had succeeded in raising the debt ceiling on time. This from S&P, which has no credible standing to downgrade anything and was itself complicit in creating the current meltdown by enthusiastically bestowing high ratings on risky mortgage-backed securities.
S&P’s analysis is deeply flawed and only provides further fodder to the Republicans’ stated commitment to take our economy to the brink with each increase to the debt ceiling.
But the debt ceiling is truly arbitrary and has nothing to do with the deficit. The debt ceiling does not prevent the United States from incurring new debts. That occurs when Congress decides to authorize more spending than revenues. The debt ceiling prevents the President from borrowing money to pay those debts when they come due. While this has never been a problem in the past, the dangerous game of chicken Republican radicals played with the full faith and credit of the United States demonstrates that we can no longer risk allowing this artifact of World War I to threaten our nation’s creditworthiness.
So, I will soon introduce legislation to take this arbitrary issue off the table altogether. Let us abolish the debt ceiling, which has become a serious threat to our economic future and a pawn for Republicans intent on holding the economy hostage to impose their own extreme agenda. Then we must move forward with bold measures to create jobs and economic development, provide aid to states, build infrastructure, instill aggregate demand back into the economy, and get money flowing once again.
If we are to prevent years of unemployment and the attrition of America’s great middle class, we must act now. We must eliminate the debt ceiling; we must create jobs and opportunity; and, we must move past this misguided and dangerous obsession with balancing the budget on the backs of the middle and working classes.
— Dr. Daniel E. Loeb
The United State and Denmark are the only countries in the World that have an official debt ceiling. In most countries, once the Legislature establishes a budget authorizing certain expenses and establishing a tax policy, simple arithmetic indicates how the Legislature’s decisions will increase or decrease that countries debt.
Only Denmark has a system similar to the United States where the legislature has to approve increases to the debt separately from approving the budget. The Danish set the ceiling high enough so that it never slows the process of borrowing money and they can avoid political conflicts like the one currently gripping the U.S.
Barry Bosworth, a senior fellow at the Brookings Institute, said the U.S. debt ceiling “has no logical basis.”
Congress, through budget and appropriations bills, has sole authority to decide how much the government will spend, so he said “it makes no sense to have a secondary rule to then object to the deficit that emerges from the other decisions.” (ABC News)
Perhaps Congress should have sought additional revenues by — for example — allowing the Bush tax cuts to expire, or by taxing the income of hedge fund managers and corporations the same way they tax the income of working Americans.
Perhaps Congress should have decreased expenses by — for example — pulling out of Afghanistan or switching to a single-payer health insurance system and empowering it to negotiate with pharmaceuticals for the best possible rates.
However, having not done so, Congress has caused that the national debt to increase, and failing to honor the resulting commitments is irresponsible and probably an unconstitutional violation of Section 4 of the 14th amendment.
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.
The Tea Party often uses the household budget as a model for the U.S. budget. However, suppose my wife and I decided to work in jobs earning a total of $50,000, and we decided to make purchases totaling $100,000. Eventually, the credit card bill arrives and showing an increase in debt as a direct consequence of the choices I made. Do I have the right to impose a “debt ceiling” and refuse to recognize the debt I have incurred about this arbitrary limit?
And surely the United States Congress does not have the right to hold the “full faith and credit” of the United States hostage to their political agenda.
New York Times chart breaking down the source of the debt follows jump.
The United States is the only country in the world with a “debt ceiling”.
Congress has approved a budget in which revenues are insufficient to cover expenses (thanks in part to extending Bush era tax cuts to Millionaires and tax loopholes for hedge fund managers, oil companies, ethanol producers and companies which ship jobs overseas). Simple arithmetic tell you that if Congress commits to a level of expenses without providing adequate revenue, then the debt will as a consequence expand. By denying the expansion of the debt already implied by the budget Congress has passed into law, Congress defies not only logic and mathematics, but the United States Constitution itself.
Treasury Secretary Tim Geithner was asked by Mike Allen about the negotiations over default and the debt ceiling. According to Geithner, a debt ceiling requirement is unconstitutional:
Geithner: I think there are some people who are pretending not to understand it, who think there’s leverage for them in threatening a default. I don’t understand it as a negotiating position. I mean really think about it, you’re going to say that– can I read you the 14th amendment?
Geithner whipped out his handy pocket-sized Constitution. Allen tried to brush it aside.
Allen: We’ll stipulate the 14th Amendment.
Geithner :No, I want to read this one thing.
Allen: It’s paper clipped! [Geithner’s copy of the Constitution was clipped so that it would open directly to the passage in question.]
Geithner “The validity of the public debt of the United States, authorized by law, including debts incurred for the payments of pension and bounties for services in suppressing insurrection or rebellion” — this is the important thing — “shall not be questioned.”