Whichever of these three possibilities comes to pass, it is hard to see Treasury securities not going to some kind of discount to their normal values in the aftermath.
Indeed, it has already started: the prices of Treasury securities coming due in early June are, right now, interesting.
Now why might the Treasury start writing rubber checks?
The way it has been explained to me is this:
The laws Congress has passed tell the Treasury to write checks: the Treasury has no discretion.
The laws Congress has passed tell the Treasury to levy taxes
And the Treasury borrows to make up the difference.
But Congress has also passed a law—the debt ceiling—commanding the Treasury not issue bonds with total face maturity values above the debt ceiling.
The Treasury has no choice but to obey all of those laws.
Obeying them all will, in early June, require it to write rubber checks that will bounce.
Agreed. The devolution of the GOP cannot be understated. Orange man = good. Everyone not following orange man = bad, evil & must be destroyed.
When your first instinct in governance is “do whatever to own the libs”, that un-seriousness puts any number of x-dates on the calendar. I keep wondering / hoping that Democrats will finally wake up to the fact that MAGA Republicans are stochastic terrorists. They are no less dangerous than the anarchist movements of the early late 19th and early 20th centuries - especially since they also align with the neo-KKK.
The great replacement that this nation must undergo is a wholesale rooting out - via the ballot box - of everything GOP.
I do not understand why Biden and the Dems are not hammering on the fact that the debt ceiling and the Budget are two separate entities, and this is not the time to be negotiating a budget…and these Rethuglikkklans should know that. So all this posturing by the know-nothing wing of the House is nothing but that, and they have no excuse for being so damn stupid.
The new electorate:
“Don’t bother us. We’re busy [texting, on facebook, gaming, blogging, influencing, working our asses off to pay for [[rent, student debt, daycare, food, car loan, credit card, Boomer parents’ long term care]]].”
This is a useful article, but it misses the most plausible use of the 14th Amendment. In the article and the accompanying chart, the option it posits is that Biden would invoke the 14th Amendment and declare that Debt Ceiling law unconstitutional, which (at least theoretically) would set up a battle over which is supreme, a post civil war constitutional amendment or a World War I statute, periodically updated.
But that’s a false and unnecessary choice. Instead of that choice, Biden could simply issue an Executive Order, pursuant to section 4 of the 14th Amendment, directing the Treasury Secretary to continue “business as usual” until Congress passed and the president signed an extension of the Debt Ceiling law. In fact, Biden could - and should - issue it before the deadline is reached.
In other words, the president would trigger the 14th Amendment as a temporary but critical interim measure, which no court would have the authority, let alone the jurisdiction, to prevent. The Justice Department would then argue that there is no constitutional conflict whatsoever. Rather, the president was simply following the standard rule of statutory construction that when you have two or more statutes that can be read to either be in conflict or can be read to be given effect, you read them to be given as much effect as possible. When a constitutional provision is in the mix, that constitutional provision dictates how you avoid or minimize the conflict. The Latin term for all of this is “in pari materia”— in case anyone is interested!
The use of this approach would not only allow Biden to both save the economy and not directly challenge the Debt Ceiling law, it would also give McCarthy a reason to push back against his hardest right wing faction. Would he take that opportunity? I suspect not, but that would be his problem, not the country’s.
Good grief. We have been losing confidence here and abroad ever since we elected a grade C Hollywood actor as President. Then we re-elected a goofball son of a president, then we elected an out and out criminal boor. The rest of the world does not and cannot take us seriously.
I don’t know about that. Gen Z has been a key factor in Democratic wins in 2020, 2022 and the specials. It’s why we’re seeing a flurry of voter suppression measures aimed at college students & new voters.
Nixon called it the silent majority… for 2024, it’s the “Silenced” majority that has to be energized to work around whatever barriers are being thrown up to keep their voices quiet.
This is a really excellent article that encapsulates Paul Krugman’s comments. I think the Premium / Consul Bond issuance is the preferred approach and essentially neuters the Debt Ceiling statute forever. It would give the time for a future Congress to repeal the statute and return some sanity to the process.
This GOP gambit to force their will on the majority using this arcane statute is really disgraceful and traitorous in its objectives. The Freedom Caucus has no more right to impose its will on the rest of us than Putin’s United Russia party. They should stop acting like they do and resume pushing their (ignorant) agenda via “regular order”, just like everyone else.
No. He orders the Treasury Sec’y to continue to pay the debts brought about by the last budget. Clearly, any new funding will have to be based on a new budget (the current one expires Sept 30, with the exception of any spending already committed beyond that date). If that budget can’t be agreed to by Sept 30, the gov’t will either shut down or Congress will grant a series of continuing resolutions. The debt ceiling is predicated on an amount, not a time limit. When the amount is passed, the old bill is obsolete, and it’s suicide to enact another one, only to be held hostage again when it is exceeded.
Meanwhile the Discharge Petition the House Dems have been cooking up for months has been filed with (according to a Congressman talking to O’Donnell, yesterday) well over 200 signatures.
Reading this article almost makes me miss being in academia. It gives me great pleasure to encounter clear thinking like this. And Fishkin’s
overall point seems to me unimpeachable.
The Constitution gives Congress the power to decide what issues are justiciable by SCOTUS.
That is a very legal way to limit SCOTUS power to obstruct progress.
A 1935 SCOTUS decision prohibits Congress from abrogating any legal US debt instrument—and a default would violate that ruling.
Biden seems to evoke feelings of disdain by his detractors. I saw him yesterday and I have come to the conclusion he is almost off-handedly ready for whatever McCarthy can do or say.
The fact it will look like a gimmick will assure markets less than the other options. Thus it is a good argument to avoid having to go the coin route if possible.
Agreed. A future Congress should limit THIS SCOTUS to only cases of original jurisdiction, (disputes between the states), and assign the final review of appellate court decisions to the 1st Circuit court in WDC. That would fix everything else.
