The only “faction” that controls whether to default, remains president of the United States.
Conservatives should be happy that Speaker John Boehner will agree to a short-term raising of the debt limit while insisting that President Barack Obama and the Democrats compromiseover a continuing budget resolution to end the government shutdown. Not because the former removes the specter of an actual “default”, but rather because it removes any plausible Democratic Party or media (but I repeat myself) allegation that a Republican refusal to raise the debt ceiling could be the cause of any downward market activity before or after the Obama Treasury Department-declared deadline of October 17.
Remember President Obama’s insistence last week that Wall Street should not be calm given the Republicans’ refusal to pass so-called “clean” CR and debt limit-raising bills:
HARWOOD: You mentioned calm. Wall Street’s been pretty calm about this. The reaction I would say, generally speaking, has been, “Washington fighting, Washington posturing, yaddah, yaddah, yaddah.” Is that the right way for them to look at it?
PRESIDENT OBAMA: No, I think this time’s different. I think they should be concerned. And— I had a chance to speak to— some of the financial industry who came down for their typical trip. And I told them that— it is— not unusual for Democrats and Republicans to disagree. That’s the way the founders designed our government. Democracy’s messy.
But when you have a situation in which— a faction is willing potentially to default on— U.S. government obligations— then we are in trouble. And if they’re willing to do it— now, they’ll be willing to do it later.
We actually agree that Wall Street (if it does actually remain, ultimately, connected to Main Street) should not be calm, but not only because “a faction” is willing, potentially, to default on U.S. obligations. The same faction that has repeatedly threatened a default also regularly defies the Constitution, statute laws and court orders and insists upon economic policies that reduce corporate profits (or cause losses) that directly affect stock prices.
That faction is none other than the President of the United States, Barack Hussein Obama.
If the sun should rise on October 18 without the current debt limit still in place, the cash on hand in the U.S. Treasury will be sufficient to pay interest on the debt, the non-payment of which is the technical definition of “default.” Moreover, given that scheduled tax receipts are many times more than future interest payments there would never be any reason for not making the payments to creditors. In fact, scheduled tax receipts would also be sufficient to pay the military and Social security benefits even if the debt ceiling were never raised again. Of course, eventually the budget would have to be balanced by reducing entitlements; but the United States is not technically “obliged” by the actual language of entitlement laws, including Social Security, to make future payments. So President Obama is not even correct when he threatens default on government “obligations” generally. The only hard and fast legal obligations that must be paid or be subject to court action on a debt are interest payments to government bondholders and contractors.
President Obama, as the Chief of the Executive Branch of the federal government, decides what bills to pay and in what order. We would preferred that any long-term debt ceiling bill also include the proposed Full Faith & Credit provision that would require the Treasury Secretary to pay interest payments on the debt first from available funds should their ever be a time when the debt limit is not raised. It is surely a sad day when the American people need to be protected from their own president, whether it concerns the credit rating of the nation. But this is the current state of affairs.
We would also be happy to hear the Speaker mention his “Boehner Rule” that insisted upon spending cuts equal to the amount that the debt limit is raised, but do think it best to use budget, rather than debt limit, negotiations to achieve spending cuts, interest payment priority, Obamacare changes and other policy goals.
Mike DeVine‘s Right.com
“One man with courage makes a majority.” – Andrew Jackson