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Forum Post: clear thinking

Posted 6 years ago on Dec. 11, 2012, 8:37 a.m. EST by ericweiss (575)
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What should Obama give to the Rs to avoid a debt ceiling battle?

Plan B for raising debt ceiling: Obama should invoke the Constitution President Obama wisely wants to resolve the looming crises with the debt ceiling and the 'fiscal cliff ' now. If he can't strike a debt-ceiling deal, he has another option: Bring out the Constitution, whose 14th Amendment states that the 'validity' of US debt 'shall not be questioned.' By L. Michael Hager | Christian Science Monitor – Thu, Dec 6, 2012

President Obama has reopened the issue of the debt ceiling – and not a minute too soon. Heated debate over the looming fiscal cliff has obscured the fact that the US government will run out of money as early as next February, unless Congress approves an increase of the debt limit, now fixed at $16.4 trillion.

Failure to raise the borrowing limit would trigger a widespread government shutdown and default on debt payments to creditors, because the US government would no longer be able to finance day-to-day operations or service its debt.

6 ways to avoid the 'fiscal cliff'

Even a protracted debate on the debt ceiling, such as took place in the summer of 2011, could have dire consequences. The financial markets would react negatively to the threat of default and to the uncertainty posed by indecision. As last year, the credit agencies would likely regard political gridlock as a reason to further degrade America’s credit rating. That’s why Mr. Obama was right to tell corporate executives this week: “I will not play that game.”

He also wisely suggests a grand bargain that resolves both the debt ceiling and the fiscal cliff (automatic tax increases and drastic spending cuts due to take effect Jan. 1). Resolving these two issues now is the best solution for the country.

The president’s debt-ceiling proposal would have him notify Congress when the debt ceiling needs to be raised, and also request an increase in the borrowing limit – but lawmakers’ approval is not required. Should Congress pass a resolution to deny a request, the president could veto it. Such an approach would avoid another political crisis in the new year and return the debt ceiling to its previous role as a matter of bookkeeping, as opposed to political brinkmanship.

Although such a mechanism was previously proposed by Senate Minority Leader Mitch McConnell, Republicans are resisting now. They fear a loss of leverage over spending cuts if congressional approval is no longer required to increase the borrowing limit.

If Obama should fail to secure a long-term solution to the debt ceiling in the context of the current fiscal-cliff negotiations, there is another way out – invoking the US Constitution.

In the wake of the Civil War, the government wanted to make clear that loans to the US government were still good (while Confederate debt would not be honored). Accordingly, the 14th Amendment includes the following provision: “The validity of the public debt of the United States, authorized by law... shall not be questioned.”

In a 1935 case (Perry v. US) the Supreme Court determined that Congress does not have the authority to renege on its obligations to its lenders. The president, then, could declare as unconstitutional the current debt-ceiling law – which requires congressional approval to raise the limit – or at least use such a threat as leverage.

The law goes back to the amended Second Liberty Bond Act of 1917. Its intent was to facilitate the financing of WWI through the issuance of long-term bonds. Until last year, when it became a political issue, Congress routinely raised the statutory debt limit as needed – always with bipartisan support.

What is different now is the willingness of House conservatives to use the debt ceiling as blackmail to force spending cuts by threats of government shutdown and credit downgrades if their demands are not met. Such political gamesmanship is beyond the intent of the law. It poses a current and serious danger to our democracy.

It is one thing to put a legal limit on spending or to try to control spending through talks such as the fiscal-cliff negotiations. But it is quite another to establish a retroactive process for refusing to pay debts already owed. Such a process was relatively harmless when both parties treated debt-ceiling increases as simply necessary when the limits were approached. Not so in today’s acerbic climate of congressional gridlock and winner-take-all mentality.



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[-] 2 points by VQkag2 (16478) 6 years ago

Worth a try. Certainly, Pres Obama doesn't have to do anything. Congress has the responsibility to raise the limit. Failing to do so will create an economic crises that will clearly be the responsibility of repubs.

Give them all the rope they need.

[-] 2 points by geo (2638) from Concord, NC 6 years ago

Rules change since 1971 and the elimination of the gold standard:

Public debt = private sector savings With a large non-domestic sector deficit, large trade imbalance.... the only option is to continue with a public debt. Lower the trade imbalance (which isn't going to happen anytime soon) and the public debt can be lowered. All three sectors can not be in deficit at the same time, or surplus at the same time.

[-] 0 points by UnFriendlyObserverB (-55) 6 years ago

We need a "Profit Ceiling "

[-] 2 points by ericweiss (575) 6 years ago

we need many things
I'd rather demand that all companies have profit participation for all employees

but why concentrate on what WE CANNOT DO

[-] 0 points by UnFriendlyObserverB (-55) 6 years ago

Oh .. uh.. Well if you didn't want to solve the financial debt problem why didn't you just say so..? A profit Cap would solve the debt problem .. EASILY .. It would reduce sales prices .. and spur on consumer spending and with every consumer dollar spent .. taxes are collected .. getting the idea .. and with a spur on consumer spending , manufacturing starts to pick up and jobs are created .. OH NO .. solving way too many problems .. ! And with the lowering of profits Consumers will have a little extra cash in their wallets .. yikes that wouldn't work .. would it .. Imagine if the consumer had a little extra cash at the end of the week .. ? Well he might afford to take his family out for dinner on Saturday .. yikes that would mean the Restaurants would be busy .. OH NO more problems solved .. all from a little wee profit cap .. so big yet so small..

[-] 1 points by ericweiss (575) 6 years ago

why waste your time with impossible goals and dreams?
do you have any proof of people's support for a "profit cap"?
if you have a poll that proves 50% of Americans support a "profit cap",

[-] -2 points by UnFriendlyObserverB (-55) 6 years ago

Any gains the middle class make.. the middleman will take .. with unfettered profits we will sink deeper and deeper into debt... there must be a cap on profits if we are to rise out of debt.

[-] -2 points by Theeighthpieceuv8 (-32) from Seven Sisters, Wales 6 years ago

The only thing really clear here is that taxes are going up next year for working and middle class families due to incessant spending, while simultaneously entitlement spending will decrease. The rest of it is just political drama.

[-] 2 points by ericweiss (575) 6 years ago

how are middle class taxes going UP?
the only way I see that is if we "go off the cliff"
and the Rs dont pass a tax cut in Jan