There is an effort on to pretend the debt ceiling is no big deal. We won’t default, they say, because Obama can simply re-direct spending to make sure our debts get paid. Why, hitting the debt ceiling could be a good thing, forcing the government to live within its means and balancing the budget in one fell stroke.
There are multiple problems with this line of thought, the primary one being that this would be an awfully big gamble. If the ceiling-deniers are wrong, the result will be economic chaos. A huge amount of the global economy rest on the idea that US debt is reliable. If that pillar is tumbled, it could be chaos. Sure, it might not be the disaster some fear. But do you really want to pull that trigger to see if the chamber is empty?
Second, it’s not clear that Obama has the Constitutional authority to balance the budget like this. Spending, as you know, originates in the House. And under laws passed by the House, most spending continues to go on even in the case of a shutdown. To prioritize debt, Obama would have to break the law and possibly violate the Constitution by essentially writing his own budget. Even if that passed Constitutional muster — do you want to give Barack Obama unfettered control of the national purse? It thought we didn’t like executive overreach.
Third, prioritizing our spending to allow for debt may not be logistically possible. Our government pays its bills — millions per day — through an automated system.
The Treasury Department maintains that it has no ability to pick and choose which bills to pay if it’s short of cash. According to the agency’s inspector general, its computer systems are designed to “make each payment in the order it comes due.” Full stop.
Under this view, if Congress fails to lift the debt ceiling, the U.S. government will only have money to cover about 65 percent of its bills. Some payments will simply fail to clear. Perhaps a payment to a defense contractor comes up short. Maybe a Social Security check bounces. Maybe an interest payment to bondholders fails.
For people who say our government is too big, the GOP seems to be kind of clueless about just how big it is and how much money flows into and out of its coffers. Two years ago, Obama noted that, with a debt ceiling breach, he couldn’t guarantee that Social Security checks would be paid. He was accused of trying to scare seniors, but what he said was correct: if any check comes in when the federal coffers are registering zero, it will not be paid. If anything, Plumer understates the problem. Both federal revenue and expenditures are highly variable depending on the time of year. Even if the budget were perfectly balanced over a fiscal year, we would run a debt in some months and a surplus in others. Under a no-more-debt scenario, this would make federal payments erratic at best.
The response to this has been to say, basically, the a default would be such a catastrophic thing that the Treasury would find a way to avoid it. I simply can not buy into that appeal to magic: problems have to be solved, not thrown out there in the hopes that a solution will magically present itself within the next week. This was the same thing they said about the sequester: it was such a bad way to cut spending that Congress would certainly find a better way to cut spending.
But aside from that, do you trust this Administration to not default in this situation? Right now, their healthcare exchanges are a debacle. And that’s with less than a million visitors a day and years to prepare. Do you really trust this Administration to carefully sort and prioritize the millions of bills our government pays every day and not fuck it up? On a week’s notice, you expect this? This isn’t a challenge on Survivor; this is our full faith and credit.
I recently had a debate about what Obama should do if we hit the debt ceiling. We came to the conclusion that he would be in a position where he would violate the Constitution either way: either by refusing to spend money Congress has authorized or by taking out debt Congress has not authorized (even with the shutdown, the government is obligated under law to continue a great deal of spending; Congress would have to pass a raft of laws to stop that spending). My opinion was, in that situation, that Obama should just issue debt. Congress’s spending authority is well-established Constitutional law. A President does not have the legal authority to refuse to spend money they have authorized or to make statutory alterations to programs. Congress’s authority to limit the debt, however, has never been challenged in the courts and some legal scholars believe the debt ceiling violates the 14th Amendment (although there is a lot of disagreement on this.
If your choice is between two Constitutional crises — and no doubt the Republicans starting impeachment proceedings either way — should you take the one with less fiscal uncertainty and more legal uncertainty?