I am not a fan of ceilings. Well, at home is good. Maybe in most any building.
But that’s not the kind that we have as the subject today. We’re talking about the debt ceiling of the federal government. It’s possible one or two people may not be as familiar with this issue as they think.
For instance, we are the only country in the world with a debt ceiling. Another minor point is that a debt ceiling is unConstitutional. Now, are you ready for some
football . . . er, uh, facts?
Yes, Virginia, the Congress of these United States, in their infinite wisdom, made us the only country in the world subject to such a nonsensical, unnecessary and useless stricture.
It isn’t merely a matter of embarrassment. It represents a potential threat to this country, and the world, that can only be guessed at. Why would they put us in so precarious position? Why would they so jeopardize us?
The debt ceiling took years to develop. It was intended to help the United States Treasury. The original intent was laudable. Its present misuse as a political weapon is despicable.
Until the time of WW I, ‘The Big One,” Congress would authorize each specific debt that was incurred. For a couple of decades, efforts were made to provide the Treasury an easier way of dealing with debts. Those efforts were formalized into a law in 1939 that provided for a debt ceiling. No good deed goes unpunished; particularly when the good deed doer has no idea what they are doing.
Most debt is incurred by action of the Congress. However, the executive branch can cause some debt. Even the courts can subject the government to debts, intentionally or not, as the result of some rulings.
However debt may be incurred, if it is legal, the Treasury must, by mandate of the Constitution, pay that debt. The Constitution makes no allowance for failure to pay any and all legal debts.
Additionally, while the above is stated quite explicitly, the Constitution is what the Supreme Court says it is. In 1935 the Supreme Court very clearly ruled that Congress did not have the power to cause any legally incurred debt to go unpaid. There would, otherwise, be no way to promise the “full faith and allegiance of the United States” to any obligation.
Those great patriotic worshipers of the Constitution may tell the Treasury that they can’t pay any bills once the ceiling is breached. They need to actually read the Constitution. It would help if they would also read an occasional ruling that the Supreme Court hands down.
While the above is true and easy to understand, there is a political consideration. It is very unlikely that any Secretary of the Treasury would be willing to be seen as defying Congress. It’s a sure bet that Secretary Geithner and any of his predecessors and successors see, or saw, their only option being to bow to Congress and pretend they have the final word.
Hey. We have a president who used to be a professor of Constitutional Law. Surely he’s familiar with the original part of the Constitution. Surely he read all of way down to Section 4 of the 14th Amendment. But, even though he may know better, he has no more political room for maneuver than the Secretary of the Treasury.
We are stuck under the thumbs of the super patriots who don’t understand most of the Constitution and disagree with everything they do understand.
Now, we hear that there is a certain amount beyond which the Treasury will be barred from borrowing. We are told that once the cash on hand runs out the Treasury will be barred from paying any bills or other obligations. Were that it was that straightforward.
They say that our armed forces personnel, those on Social Security and many others cannot be paid . . . but guess who can. Did you say banks? You are either absolutely brilliant or at least have a realistic perception of the way our system works.
How do they justify that? Ask them. The IRS collection personnel will continue to be paid as you and I will still be required to come up with the wherewithal to keep those bankers bonuses flowing.
Okay, you say. What’s so bad about not raising the debt ceiling? The truth is, we don’t know. I can recall nothing even close to this happening before. We have no real analog for guidance. We must depend on educated guesses.
Some of the guesswork can provide a relatively high degree of confidence. We know the level of greed that guides the majority of players. We know the inane ideology they will use to rationalize their actions. We know that fear mongering will likely set new standards. Put them all together Dr. Frankenstein.
Usually, interest on the debt is one of the largest items in the annual budget. It continues to be while significantly diminished. You may have heard that interest rates are at historic lows. That has allowed us to borrow at very low cost for the past few years. It is obviously to our government’s, and taxpayers’, benefit to extend those low interest rates as long as we can.
That makes sense, you say. Won’t we? Many in and out of Congress are determined that we pay higher rates. How could they be so unconcerned for our country’s economic well-being? Some because they are ideologues. Some for putative political advantage. Some for both reasons.
It is difficult to understand the ‘thinking’ of some politicians. They are owned by the banks. The banks love the essentially free money they can borrow now. The banks have told their representatives not to shut down the government. They likely will obey their orders but for the sake of their ideology and their ever credulous constituencies they want to push it to the brink.
The banks, our creditors and other major financial entities relying on our “full faith and allegiance” will begin to get fidgety at some point before the actual deadline. The automatic, ideologically-based response will be to raise interest rates. Our government, we the taxpayers, will lose those low interest rates ahead of the final due date.
Here we have the true believers screaming that the debt is too large. They threaten massive cuts to every program that helps the middle class and sustains the poor. Though our taxes are the lowest in more than 60 years, they bemoan such an intolerable tax burden on the top 2% and are willing to increase the debt for their benefit.
Now comes the kicker. They are willing to cause the government’s interest rates to increase incurring additional debt in the hundreds of billions. Don’t forget to send these self-described debt haters a thank you note.
Why all of the concern by the banks, China, the Saudis, the Brits and all of the other major players? Because the US Dollar is the currency of the realm. Everyone puts their “full faith and allegiance” into the Dollar. Everything in international trade is denoted in the Dollar. There is the stability required for the financial world to function because there is a common coin.
So, just replace it with the Euro. You may not have heard that several members of the European Community are experiencing even greater financial discomfort than are we. Greece, Ireland, Iceland, Portugal and others. This is putting heavy stress on the stronger national banks of the Community. There is not inconsiderable talk of some members leaving the Euro. Some even talk of abolishing it.
That doesn’t sound to me like a promising alternative. What about gold? Give me a moment. Let me stifle my paroxysm of giggling.
The Washington Monument measures 55 feet on each side at its base. It stands 555 feet high. All of the gold ever gathered by mankind in its entire history would equal about one-third of the volume of the Washington Monument. That doesn’t seem to be all that much. Use that as the basis for finances of the entire world? And that doesn’t even take into consideration how much would be needed for the egos of both the rich and poor in Rolexes and teeth.
Allow me to translate that for sports fans. The playing field for football is 300 feet long and 160 feet wide. This, of course, doesn’t include the end zones. All of the gold gathered in the history of mankind would stack up on that playing field a bit less than 11½ feet high, barely higher than the crossbars on the goalposts.
People usually fail to take into consideration how advantageous it is to have our currency accepted as the de facto world standard. When OPEC quotes prices in Dollars we have both a slight real and a psychological advantage. We are, to a degree, insulted from most of the zigs and zags of currency values. In many cases, the cost and convenience of currency exchange works to our advantage as tourists or direct buyers from other countries.
If the world holds our credit worthiness or solvency in question, the pedestal of world superpower will start to crumble at an alarming rate. Our national strength has always been intimately yoked to, indeed based on, our perceived economic dominance.
It is impossible to quantify the potential damage from shutting down the government, to us and everyone else. The loss of the standard will mean economic turmoil around the world until a new system can be developed. The present system developed in the aftermath of WW II and was possible because the rest of the world was prostrate. I don’t recommend revisiting those conditions.
The politicians, most of them, are presently playing games with this issue for some expected political advantage. It’s time to realize that it isn’t a game and hope some adults come to the fore.