July 26, 2011 [CLICK HERE to see proper format.][LINK / comment]
Debt ceiling showdown: farce majeur
It's hard to believe that, in the greatest and most prosperous nation the world has ever known, the government is on the verge of running out of funds. And yet here we are, with another budget crisis on Capitol Hill, brought on by the divided structure of our legislative branch and the divided (and logically inconsistent) opinions of the American people. Last night President Obama made a prime-time televised address to the nation, and while I tried to be receptive to his pleas for compromise, his habitual use of demagogic rhetoric very quickly turned me off. Then House Speaker John Boehner had his turn, and he too failed to move me; I find the "no more blank checks" slogan to be inappropriate and misleading. (More on that later.) In short, both parties -- especially the Republicans -- have adopted unduly rigid negotiating positions, raising a real risk that no deal will be reached. If so, the creditworthiness of the United States government will be severely damaged. But unlike a natural disaster which releases firms from the obligation to pay their debts on time (force majeur), in this case the default would be a deliberate act of economic sabotage, totally unjustified.
Compromise is a dirty word in many circles these days, but unless one party decides to abruptly surrender (not very likely), that is the only way the crisis will be ended. That was one of the main themes of my very first op-ed column, which appeared in the Staunton News Leader last Friday. I made clear that both parties deserve blame for the mess we're in, and warned that failure to resolve things in a suitable manner would put us on the road to becoming a banana republic. As in laughing stock, or farce. (I'll follow up on that them in a future column.)
As I wrote to Facebook friend Nick Sorrentino last month, "The inability of the two parties to at least agree on [modest, across-the-board budget cuts], rather than insisting on their own respective fiscal agendas, even at the risk of default, is inexplicable." But both parties are trapped by their own past rhetoric, and by commitments to their core constituent groups, many of whom often threaten to withhold their voting support unless their demands are met. A prime example would be Grover Norquist, head of Americans for Tax Reform. Over the past two decades, he has cajoled hundreds of national and state legislators to sign a pledge never to raise taxes, and he is obviously holding them to that promise as this crisis unfolds. You wonder why the Republicans won't budge on taxes? Just ask Grover.
The whole episode is a larger-scale replay of the near-shutdown of the U.S. Government last March, as Congress struggled to pass a budget resolution for the rest of fiscal year 2011. A shutdown would have served no one's interests, and indeed it would have made no sense at all. The very fact that it was a very real prospect until the eleventh hour was an indication of serious dysfunction in Washington, and now the problem has become all too obvious. In this regard, I am quickly losing confidence in House Majority Leader Eric Cantor, who has taken up the role of Tea Party champion in the debt ceiling negotiations. It's almost as if he is trying to replace John Boehner as House Speaker.
Now, about this "no more blank checks" talk: Contrary to what Rep. Boehner implies, raising the debt ceiling will not give President Obama more money to spend as he wishes. The only money that the U.S. government can spend is that which has been appropriated by the U.S. Congress, and signed into law by the president. Indeed, Congress (incluing the Republican-led House of Representatives) already committed itself to spending money for the rest of this fiscal year (which ends on September 30), and it is morally obliged to provide the funds for those spending commitments. That "blank checks" rhetoric is a red herring if I ever heard one.
Part of the problem may be the "weirdness" that has been spreading through the Grand Old Party in recent years. Referring to Mike Huckabee, among other GOP prospective presidential candidates, conservative columnist George Will noted "vibrations of weirdness emanating from people associated with the party." (See Washington Post; hat tip to Matthew Poteat.) This was referring to the "birther" movement, but also is pertinent to understanding the fierce do-or-die attitude toward policy issues exhibited by many Republican leaders. Ideological conformity can be very weird, especially when reality calls basic beliefs into question.
The constitutional angle
In my column, I highlighted what I believe to be the fundamental source of the dysfunction in Washington, namely, the trend toward factionalized and polarized party politics. I argue that this is a predictable consequence of this nation having abandoned its constitutional republican form of government, and having moved toward a quirky hyper-democratic system in which control of government power becomes an apocalyptic battle. I plan to write much more about prospects for restoring constitutional government in the future, but for now there are several constitutional aspects to this issue that have arisen.
For example, economic writer Bruce Bartlett recently opined that the President could unilaterally authorize the Treasury Department to issue new debt, even though the Constitution expressly gives that power to Congress. Bruce and others have interpreted the 14th Amendment's provision that the validity of U.S. government debt "shall not be questioned" to mean that the government must do whatever is necessary to service those debts. On Facebook, I objected to this line of reasoning:
Art. I Section 8: "Congress shall have Power ... to borrow Money on the credit of the United States." The debt ceiling is the exercise of this power. No one else in government can authorize borrowing, period, notwithstanding Prof. Abramowicz's contorted reading of the 14th Amendment. If I can't make a payment due on a debt, that doesn't mean the debt is no longer valid.
I went on to clarify that the House Republicans were being irresponsible in using the debt ceiling for bargaining purposes. I argued that the Treasury Department could find some way to make interest payments to creditors and thus avoid default, concluding "Both parties disgust me." After I noticed that the National Debt Clock is already up to $14.5 trillion, which is $200 billion over the $14.3 trillion debt ceiling, I reconsidered. Indeed, I think they are quickly running out of accounting tricks, and the August 2 deadline may be real after all.
Finally, I recently applied some of what I learned in graduate school in one of my Facebook dialogues, contemplating a rather scary scenario:
The fact that the U.S. economy has managed to sustain such (peace time) record-breaking deficit levels may be a manifestation of the thesis of economist Susan Strange, who argued that the U.S. government, especially under Ronald Reagan, exploited its global hegemonic power (dollar as world currency) as an easy way to finance deficit spending. If so, as other countries move to other currencies as a reserve, we could face a rapid financial collapse.