I’ve hesitated to weigh in on the coming battle over the debt ceiling. It’s complicated and arcane, and I am fearful of getting it wrong. But we’re in a time when responsible citizens have to have an informed opinion on all sorts of difficult issues. When issues are complex, we are sometimes tempted to leave it to the professionals. This just won’t do in an era when the pros resort to fear tactics.
White House economist Austan Goolsbee and others have been saying that, if the debt ceiling is not raised, the sky will fall. Goolsbee recently told the Chicago Chamber of Commerce, “If we hit the debt ceiling, we default.” Put that way, who can be against raising the ceiling? Sure, we’re maxed out, but we have no choice. But there is an emerging consensus that says otherwise.
Indeed, Kevin Williamson of National Review Online brings us welcome news: The world won’t end in May, even if the debt ceiling isn’t raised. This means we can actually have a genuine debate about the debt ceiling. We don’t have a gun to our heads. Here is Williamson’s take:
Debt service accounts for about 7 percent of federal spending. Current revenues will more than cover that, regardless of whether the debt ceiling is raised. We can pay our debts – and our troops, too – out of present revenues. But if we fail to raise the debt ceiling, we’re going to have to economize on some other things: discretionary spending, for sure, but probably also Social Security, Medicare, and Medicaid. But here’s the thing: Any meaningful budget-reform deal is going to have to address discretionary spending, Social Security, Medicare, and Medicaid, in the long term. There is no way around that. (Defense spending needs to be cut, too, but defense is a different thing from farm subsidies and NPR money: a core national priority. You don’t lump national defense in with national embarrassments such as the Small Business Administration or research grants for Obama’s magic unicorn-powered economy.)
In truth, the federal government expects to collect $2.2 trillion in revenue this year. The problem is that it wants to spend $3.8 trillion.
You can do a lot with $2.2 trillion. You can fund Social Security, Medicare, Medicaid, SCHIP, debt service, unemployment, welfare, and national defense at their 2008 levels. My recollection of 2008 is that it was not exactly a time of Spartan fiscal discipline.
Funding the majority of the federal government at 2008 levels is not “default.” It’s not anything like default. It’s not in the same category of things, events, or concepts as default.
The notion that default is not inevitable also gets backing from a piece in today’s Wall Street Journal by David Rivkin and Lee Casey, D.C. lawyers who served in the Reagan Justice Department. They point to a relatively obscure clause in the 14th Amendment that could be used by budget hawks.
The 14th Amendment, you’ll recall, was to ensure that former slaves had full citizenship. But it was adopted at a time of strain-wars are expensive, and the United States had just fought a whopper of a war-and there were enormous federal debts. Therefore the amendment forbade the U.S. to default on its debt.
As a result, unlike most other sovereign states, the U.S. constitutionally cannot default on its financial obligations. In particular, it must continue to make payments, interest and principal, on its bonds, effectively requiring Congress to provide sufficient authority for that purpose. This fact, which should be highlighted at every opportunity, makes the U.S. a better credit risk than it may otherwise seem-especially since U.S. Treasury obligations, if it came to it, could be enforced in the courts by their owners.
Consistent with its obligations under Section Four, Congress should promptly increase the debt ceiling, but with one key caveat: The increase can be used only for borrowing to service existing obligations. By anchoring this action in a specific constitutional obligation, Congress would make it difficult, if not impossible, for the Obama administration to oppose this resolution of the debt-ceiling battle. At the same time, Congress should reclaim immediate control of the issuance of all other new debt obligations.
Messrs. Rivkin and Casey assert that this would put the deficit hawks in the driver’s seat. The only thing that worries me about this theory: we have a government that increasingly doesn’t play by the rules. We saw this in the GM bailout, when the creditors were stiffed, in effect altering our bankruptcy law without a single formal rule change, to provide support for unions that in return are a bulwark of support for the current administration.
Still, the knowledge that we don’t have to default should give the anti-spending solons a powerful weapon.