links about us archives search home
SustainabiliTankSustainabilitank menu graphic
SustainabiliTank

 
 
Follow us on Twitter

 

Posted on Sustainabilitank.info on October 8th, 2013
by Pincas Jawetz (PJ@SustainabiliTank.com)

 

 

Op-Ed Contributor

 

Obama and the Debt.

 

 

Sean Wilentz is a professor of history at Princeton University.

 

 

 

PRINCETON, N.J. — THE Republicans in the House of Representatives who declare that they may refuse to raise the debt limit threaten to do more than plunge the government into default. They are proposing a blatant violation of the 14th Amendment, which states that “the validity of the public debt of the United States, authorized by law” is sacrosanct and “shall not be questioned.”

 

      Chris Gash

 

 

 

Yet the Obama administration has repeatedly suppressed any talk of invoking the Constitution in this emergency.

Last Thursday Jay Carney, the White House press secretary, said, “We do not believe that the 14th Amendment provides that authority to the president” to end the crisis. Treasury Secretary Jacob J. Lew reiterated the point on Sunday and added that the president would have “no option” to prevent a default on his own.

In defense of the administration’s position, the legal scholar Laurence H. Tribe, who taught President Obama at Harvard Law School, has insisted, as he put it two years ago, that “only political courage and compromise” can avert disaster.

These assertions, however, have no basis in the history of the 14th Amendment; indeed, they distort that history, and in doing so shackle the president. In fact, that record clearly shows that Congress intended the amendment to prevent precisely the abuses that the current House Republicans blithely condone.

Congress passed the 14th Amendment and sent it to the states for ratification in June 1866. Its section on the public debt began as an effort to ensure that the government would not be liable for debts accrued by the defeated Confederacy, but also to ensure that its own debt would be honored.

That was important because conservative Northern Democrats, many of whom had sympathized with the Confederacy, were in a position to obstruct or deny repayment on the full value of the public debt by paying creditors in depreciated paper money, or “greenbacks.” This effective repudiation of obligations already accrued — to, among others, hundreds of thousands of Union pensioners and widows, as well as investors — would destroy confidence in the government and endanger the economy.

As the wording of the amendment evolved during the Congressional debate, the principle of the debt’s inviolability became a general proposition, applicable not just to the Civil War debt but to all future accrued debts of the United States. The Republican Senate leader, Benjamin F. Wade of Ohio, declared that by placing the debt “under the guardianship of the Constitution,” investors would be spared from being “subject to the varying majorities which may arise in Congress.”

Two years later, on the verge of the amendment’s ratification, its champions inside the Republican Party made their intentions absolutely clear, proclaiming in their 1868 party platform that “national honor requires the payment of the public indebtedness in the utmost good faith to all creditors at home and abroad,” and pronouncing any repudiation of the debt “a national crime.”

More than three generations later, in 1935, Chief Justice Charles Evans Hughes, ruling in the case of Perry v. the United States, revisited the amendment and affirmed the “fundamental principle” that Congress may not “alter or destroy” debts already incurred.

House Republicans threatening to refuse to raise the debt ceiling — that is, force a repudiation of debts already accrued — would violate that “fundamental principle” of the Constitution.

 

Surely the lawyers advising and defending the White House, let alone the president, know as much. Refraining from stating this loudly and clearly, and allowing Congress to slip off the hook, has been a puzzling and self-defeating strategy, leading to the crippling sequester and the politics of chronic debt-ceiling crisis. More important, by failing to clarify the constitutional principles involved, the administration has neglected to do its utmost to defend the Constitution.

That failure has led to another abdication, involving constitutional action as well as constitutional principle. The White House, along with Mr. Tribe, has rightly pointed out that the 14th Amendment does not give the president the power to raise the debt limit summarily.

 

But arguing that the president lacks authority under the amendment to halt a default does not mean the executive lacks any authority in the matter. As Abraham Lincoln well knew, the executive, in times of national crisis, can invoke emergency powers to protect the Constitution.

Should House Republicans actually precipitate a default and, as expected, financial markets quickly begin to melt down, an emergency would inarguably exist.

In all, the Constitution provides for a two-step solution. First, the president can point out the simple fact that the House Republicans are threatening to act in violation of the Constitution, which would expose the true character of their assault on the government.

Second, he could pledge that, if worse came to worst, he would, once a default occurred, use his emergency powers to end it and save the nation and the world from catastrophe.

 

Were the president to act with fortitude, Republicans would continue to lambaste him as the sole cause of the crisis and scream that he is a tyrant — the same epithet hurled at Andrew Jackson, Lincoln and Franklin D. Roosevelt.

Lincoln, who became accustomed to such abuse, had some choice words in 1860 for Southern fire-eaters who charged that he, and not they, would be to blame for secession if he refused to compromise over the extension of slavery: “A highwayman holds a pistol to my ear, and mutters through his teeth, ‘Stand and deliver, or I shall kill you, and then you will be a murderer!’ ”

It is always possible that if the administration follows the two-step constitutional remedy, the House might lash out and try to impeach Mr. Obama. Recent history shows that an unreasonable party controlling the House can impeach presidents virtually as it pleases, even without claiming a constitutional fig leaf.

But the president would have done his constitutional duty, saved the country and undoubtedly earned the gratitude of a relieved people. Then the people would find the opportunity to punish those who vandalized the Constitution and brought the country to the brink of ruin.

=====================================================

Default Threat Generates Fear Around Globe.

 

Five years after a financial crisis in the United States helped spread a deep global recession, much of the world again fears collateral damage.

 

LONDON — The bitter fiscal stalemate in Washington is producing nervous ripples from London to Bali, with increasing anxiety that the United States might actually default on a portion of its government debt, set off global financial troubles and undercut fragile economic recoveries in many countries.

 

Readers’ Comments

“One wonders whether this is a precursor to an increasingly ungovernable nation where the parties simply oppose each other on all issues regardless of the cost to the nation.”      Tim, sausalito, ca

 

 

Five years after the financial crisis in the United States helped spread a deep global recession, policy makers around the world again fear collateral damage, this time with their nations becoming victims not of Wall Street’s excesses but of a political system in Washington that to many foreign eyes no longer seems to be able to function efficiently.

There is plenty of evidence that the United States remains engaged globally on many levels, with the dual commando raids on targets in Africa this weekend the most recent. But the partial shutdown of the United States government has shown again that Washington’s problems extend beyond American borders. Effectively grounded by the political crisis at home, President Obama was absent from a summit meeting of Pacific Rim leaders in Indonesia on Monday, giving China greater opportunity to highlight its role in the region.

One of the attendees, President Vladimir V. Putin of Russia, provided a possibly sardonic statement of sympathy for Mr. Obama. “We see what is happening in U.S. domestic politics and this is not an easy situation,” Mr. Putin said, adding, “If I was in his situation, I would not come, either.”

In Europe, the effort to reach a big new trade accord with the United States is at a standstill, with many government agencies in Washington operating with skeletal staffs. And as worrisome as that kind of delay is in Europe, it is only a precursor to the almost certain economic fallout if the United States does not raise the debt limit and defaults for the first time on government securities.

Foreigners often complain, usually with some forbearance, that the United States is so powerful that its president is in some important sense their president, too. In their case, however, they lack the opportunity to cast a vote.

There is not much that any foreigner can do about Mr. Obama’s confrontation with the House speaker, John A. Boehner, who said Sunday that his Republican members would not accept a clean bill — one with no conditions — that would raise the American debt limit before the government hits its borrowing limit and risks technical default as soon as next week. At the same time, Mr. Boehner has told colleagues privately that he would avert a default, but whether he actually has the ability to do so remains uncertain.

“The international community is asking, ‘Does the U.S. still have the will to act?’ ” said Xenia Dormandy, a senior fellow at London’s Chatham House and a former American official in the State Department and the National Security Council under President George W. Bush.

“Both the Syria vote and the current budget crisis are nerve-racking for the world,” she said, referring to Mr. Obama’s sudden decision to ask Congress to authorize a strike on Syria and then changing his mind.

Alain Frachon, a columnist and former Washington correspondent for the French newspaper Le Monde, said, “Washington is looking more like the Italian political system, with its permanent crises, and not a presidential system, as before.”

“People are worried about the debt ceiling — it could be the little drop that could trigger another crisis in financial markets,” he said. “And it’s just when there was the perception for the first time in the long sovereign debt crisis that there is a window of opportunity to breathe a little bit, and to introduce a bit more suppleness into the way we’ve managed it.”

The anxiety is all over Europe, Mr. Frachon said, and it comes just as Greece and Spain seem to be turning around, as there are spurts of growth that promise an end to recession, and as Germany has gotten through its elections and Rome through another political crisis. Another financial meltdown would hurt France, too, he said, not just Greece, Portugal and Spain.

“People don’t want to see all this fragile equilibrium destabilized by a possible financial crisis provoked in Washington,” he said.

Jean-Paul Fitoussi, an economist at the Institut d’Études Politiques de Paris, said a default would slow the American economy and depreciate the dollar, “so it would lead to a loss of competitiveness in Europe at the very moment when all policies in Europe are aimed at increasing competitiveness, and that would be very bad news.”

Perhaps worse, he said, is that “the banking system in Europe remains fragile, so more bad news could have unforeseen consequences on the world’s financial system.”

The United States has gone through government shutdowns before, Mr. Fitoussi noted, but this time it feels different, even if it turns out to be short-lived.

“Perhaps we have not completely understood the American Constitution, and the effective power of the president is not as strong as we believed,” he said. “And maybe it’s because Obama is not using his constitutional power very well.”

The weekend military strikes on terrorist targets in Libya and Somalia are a perfect indication that the American government can act when its direct interests are at stake, said Ms. Dormandy of Chatham House. But the deeper question is whether a more insular, less globally active United States is emerging for the longer term, or is just a function of the Obama administration’s reaction to events.

“The jury is still out,” Ms. Dormandy said, “but I would say it seems like a more profound transition.”

Alexander Lambsdorff, a member of the European Parliament for the German Free Democratic Party, sees a possible benefit for the euro and the euro zone if the United States defaults, however briefly. Investors will seek an alternative to the dollar in German, Dutch and Finnish bonds, he said. “If European leaders have proven one thing,” he said, “it is their resolve to keep the euro afloat and their countries out of default.”

Mr. Lambsdorff said that he admires the United States Constitution, but that the founders never imagined “a media democracy.” The weakness of the American system is in the constant political campaigning required for the House of Representatives, he said.

“In the permanent campaign mode the representatives find themselves, there is an incentive to be more radical and less compromising,” he said. “But no democracy works without compromise, and if compromise starts to be elusive, then a democratic system has to rethink itself.”

============================================

Editorial

 

The International Fallout.

 

 

 

The Republican-induced government shutdown and the party’s threats to create another crisis next week over the debt ceiling are causing harm internationally as well as at home. They are undermining American leadership in Asia, impeding the functioning of the national security machinery, upsetting global markets and raising questions about the political dysfunction of a country that has long been the world’s democratic standard-bearer.

 

 

The biggest foreign policy casualty, so far, may be the cancellation last week of President Obama’s trip to Asia, which the president’s press secretary said was necessary so he could deal with the shutdown and the political stalemate in Congress. Even though he sent Secretary of State John Kerry in his place, this was the third time that Mr. Obama had canceled or postponed a trip to Asia, further hampering his efforts to make the region a centerpiece of his foreign policy.

In Mr. Obama’s absence, China was able to grab the spotlight. China’s leader, Xi Jinping, who became the first foreigner to address the Indonesian Parliament, offered billions of dollars in trade to that country. Mr. Xi then visited Malaysia (another stop President Obama had planned) and announced a “comprehensive strategic partnership,” including an upgrade in military ties. Mr. Obama should reschedule his trip as soon as he comfortably can.

The fiscal chaos has also given China, America’s largest creditor, an opportunity to scold the United States. On Monday, in the Chinese government’s first public response to the stalemate in Washington, Vice Finance Minister Zhu Guangyao urged the United States to “earnestly take steps” to avoid a debt default to ensure the safety of Chinese investments and the global economic recovery.

Other financial leaders also felt compelled to speak out, including South Africa’s finance minister, Pravin Gordhan, who warned that the global community has much to fear. “This is clearly an issue that might go to the brink,” he told Reuters. On Monday, most global markets were lower, and the price of oil dropped as traders became increasingly anxious about the standoff in Washington, particularly over the debt ceiling.

The shutdown of the American government is being felt in other ways as well. A round of negotiations between the United States and Europe on the world’s largest free-trade deal, set for next week in Brussels, was canceled because the United States trade representative, Michael Froman, said he lacked the staffing and the finances to make the trip.

And while Republicans accused the Obama administration of being ill prepared for the 2012 attack in Libya that killed four Americans, including the ambassador, the shutdown they have imposed has halted vital training for State Department security officers and improvements to American embassies.

The director of national intelligence, James Clapper Jr., told a Senate committee that furloughing 70 percent of the intelligence agencies’ civilian employees was “extremely damaging” to intelligence-gathering efforts. And, at a time when the United States is about to begin a critical round of negotiations with Iran on the nuclear program, Wendy Sherman, an undersecretary of state, has said that the shutdown has “totally depleted” the government’s ability to enforce sanctions against Iran.

The shutdown is taking a toll that looks even more self-defeating when the consequences beyond America’s shores are taken into account.

 

Be Sociable, Share!

Leave a comment for this article

###