For months now, the Republicans (especially the Tea Party representatives) have used the debt ceiling as a means to leverage power against President Obama and the Democratic Senate. As we recently pointed out on Democratic Perspective, this is an entirely artificial crisis. Contrary to the rhetoric of Republicans, refusing to raise the debt ceiling will NOT cut the national deficit. It will NOT balance the budget. And it most certainly will NOT create jobs.
What it will do is drive our struggling economy off a cliff.
Since March of 1962, our nation has raised the debt ceiling more than 70 times. Ronald Reagan raised it 17 times. George W. Bush raised it 7 times.
Of course, this is not the first time that a vote on the debt ceiling has been politicized. There have been votes against the debt ceiling to protest wars and other issues. Indeed, even then Senator Obama voted against raising the debt ceiling when Bush was president as a protest against the unfunded Iraq War. But the ultimate passage of the measure has never before been in doubt.
To be clear, by raising the debt ceiling, Congress is simply stating that the United States will meet its obligations. The money has already been authorized by Congress. According to Treasury Secretary Timothy Geithner, failure to raise the debt ceiling will force the U.S. to selectively default on its obligations. And it will mean that U.S. bonds will be downgraded and foreign investors will be hesitant to buy U.S. Treasury Bills (currently the world’s most sound investment).
This could result in a variety of potentially catastrophic events. The dollar could be replaced as the world standard currency. Interest rates on everything from credit cards to home loans could skyrocket. Social Security checks could be delayed or, worse yet, bounce. And world stock markets could crash, driving down the value of our 401ks. Or, to quote former Treasury Secretary Lawrence Summers, it would be “Lehman on steroids.”
Yet despite these warnings, some Republicans (especially the Tea Party backed Congressional representatives) still don’t want to raise the ceiling under any circumstances. It would seem that they want to follow the path of their Republican predecessors who refused to vote for TARP (Troubled Asset Relief Program) in 2008 until the markets crashed.
If Republicans refuse to reach a compromise on a plan before Tuesday, August 2, the President has one other potential option: The United States Constitution. Section 4 of the 14th Amendment 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.”
Although Constitutional scholars are divided on the legality of the President invoking this option, it does provide a safety net for our economy. And even conservative Republican Senator Chuck Grassley has said that the 14th Amendment seems to over-ride the notion of a Congressional debt ceiling.
Let’s hope that this step is not necessary. It would almost certainly result in a lengthy court battle and possible impeachment. But, in our opinion, it’s better than the U.S. defaulting on its debts.