Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
@Yogibearbull. This morning MSNBC has a piece about how the using the 14 may be the only way out,,, why it would be risky and how it may play out. Ironically the author sees it as a win win for both sides. Sorry I haven’t a clue how to provide a link.
Purely from an investment perspective, I think if it's a short-term technical default it will be a buying opportunity for stocks and bonds as others have mentioned. If that short-term technical default gets drawn out in any way, that "buying opportunity" will turn disastrous, as the subsequent losses will far exceed any gains from the previously hoped-for blip down. That is the problem with seeing it as a buying opportunity. You have to essentially be able to read the minds of financial terrorists and idiots in the House willing to allow the country to go into default in the first place just to gut our social safety net. Do they cave or not after the technical occurs? And if the opposite occurs, if the Democrats cave and give in to their demands, what sort of message is that sending? That we as a nation negotiate with terrorists. It just means more standoffs in the future.
If there is a default, I think there will be sufficient time to buy after the political solution is reached. You might not hit the lowest of the low points. But the market will be a good ways down from where it is now. And knowing the solution might be worth knowing before buying.
@DavidrMoran Exactly, it sets a bad precedent to yield to terroristic demands:
Still, the most important reason to avoid entering into negotiations over the debt limit itself goes beyond politics. It is why, in 2011, Mr. Obama pledged never again after trying to negotiate with the Republicans. Allowing the Republicans to use the threat of default as extortion could cripple the remainder of Mr. Biden’s presidency.
This time it’s spending cuts and work requirements for Medicaid recipients. What happens when the debt limit comes up again next year? Will the Republicans demand a federal abortion ban? A pardon for the Jan. 6 perpetrators?
The Tribe article in NYT is very informative and makes a strong case that in fact it is the debt ceiling law that is unconstitutional, and the 14th gives Biden a clear reasonable and legal way to ignore the crazies.
Not only can the US debt "not be questioned" but he points out that passing a budget requiring deficit spending essentially guts the 1917 debt ceiling law.
No other country in tht world manages it's finances this way
Professor Tribe makes a nice case for disregarding the debt ceiling, but he is not making the argument that the 1917 debt ceiling law is unconstitutional.
The authority to borrow on the full faith and credit of the United States is vested in the Congress by the Constitution. Article I, Section 8, Paragraph 2, states "[The Congress shall have power]…to borrow money on the credit of the United States." In 1917, Congress, pursuant to the Second Liberty Bond Act, delegated authority to the Treasury Department to borrow, subject to a limit. This action mitigated the need to seek congressional authority on each issuance, providing operational convenience. The debt limit essentially achieved its modern form in the early 1940s.
If that delegation (subject to a debt ceiling) were unconstitutional, then all existent debt (i.e. all debt incurred since 1917) would be unconstitutional.
In order for the debt to be legal, it would be necessary to void the debt ceiling portion of the law without voiding the law in its entirety. Splitting a law like this is possible only if the law is deemed severable. Severability depends upon intent and whether the remaining portion of a law can make sense absent the portion that is excised.
Here, Congress ceded (delegated) some of its Article I authority to the executive branch, conditionally. The intent was to slacken the borrowing reins (for convenience, as noted above) without completely releasing the reins. IMHO that intent is thwarted by delegating borrowing authority absent constraints. It is not obvious that the debt ceiling could be severed from the statute. But as I indicated, that's not Tribe's argument.
Rather, he is analogizing with Lincoln's suspension of habeas corpus, that under certain exigent circumstances parts of the Constitution may be disregarded. While I'm inclined to accept that argument, his reference to Lincoln may not be on point.
The Constitution explicitly provides for the suspension of habeas corpus under certain conditions, as explained in the piece linked to from Tribe's column. The issue with Lincoln was not whether suspension of a law (habeas corpus, a law enshrined in the Constitution) was legal. Rather, the issue was who had the authority to exercise that escape clause - the executive branch, the legislative branch, or either.
Tribe might have been more persuasive by quoting
Justice Jackson's well-known words, the Constitution is not "a suicide pact." Terminiello v. Chicago, 337 U.S. 1, 37, 69 S.Ct. 894, 93 L.Ed. 1131 (1949) (dissenting opinion in a case involving the First Amendment). The Constitution itself takes account of public necessity. Ziglar v. Abbasi, 137 S. Ct. 1843, 1883, 198 L. Ed. 2d 290 (2017).
I know this is water under the bridge, but I am curious if anybody knows why Biden, Schumer and Pelosi didn't get together at the end of last year and raise the debt ceiling when they still controlled the House?
Especially, in early November, after the Democrats lost their comfortable majority of the House, they should have made this issue a top priority in the remaining two months of the legislative session. After all, it was well known what the Republican strategy would be. What am I missing?
Of course there should be a debt ceiling. No country can just spend and spend , and go more and more in debt. There must be a limit. To go into unlimited debt will destroy our country as it has other countries. I support a balanced budget. Some states have a balanced budget law and they are doing better than those without one.
The time for discussions around "what can we afford and how do we pay for it" is at the time of setting the budget. Not after already incurring the expense.
I know this is water under the bridge, but I am curious if anybody knows why Biden, Schumer and Pelosi didn't get together at the end of last year and raise the debt ceiling when they still controlled the House?
Especially, in early November, after the Democrats lost their comfortable majority of the House, they should have made this issue a top priority in the remaining two months of the legislative session. After all, it was well known what the Republican strategy would be. What am I missing?
Fred
IIRC they didn't like the 'optics' of doing it and then having the GQP lambasting the Dems as essentially blowing open America's spending from them into the '24 elections -- even though that's not what the 'debt ceiling' is, it's hard to explain such DC nuances to the average person.
Lurching from self-inflicted crisis to crisis and then punting solutions until the next crisis is NOT an effective way to run a country or a company. But thanks to how the country's governance is constructed in both the state and national levels, we have the inmates running the asylum on all sides, and this is the result.
Old Joe; Texas is an example of a balanced budget state that is doing better. Texas has a balanced budget, no state income tax and is doing great. New business and people moving in every day to get away from the high tax states with huge debts.
I've lived in TX for 17 years and moved from CA. TX today is very different than what it was in 2006. I wouldn't move to TX today. This is a state full of nut jobs at every level of government. Abbott and Patrick would make Taliban proud.
TX lack of income tax is more than offset by high property taxes, high insurance bills and bare minimum services for residents.
States cannot print their own currency so by definition they pay for their budgets by either taxes or selling bonds. Sell too many and interest rate required goes up, putting limit on debt
Thank you for the details. Very informative. To me the germane point is that the new borrowing is required to pay for debt already legislated by Congress, not new programs or spending. The Constitution says this debt “ shall not be questioned” but putting a limit on the amount that may be incurred in fact, questions it, as some bills would not be paid if there is not enough tax revenue to pay them.
Congress in fact is responsible for both the Debt that “ cannot be questioned” and for a law that says there are limits on what will be paid, until the ceiling is raised.
If they wanted to limit the debt that needed to be incurred, they should have either not passed spending bills in the past without money in the bank to pay for them, or raised taxes enough to pay the bills.
I dont see how Congress can limit debt incurred without “ Questioning “ the debt of the US.
Not a lawyer by a far stretch but to me, there cannot be a ceiling for debt that has already been incurred by Congress itself.
I hope this goes to the SC and the entire silly concept of debt ceiling gets busted once and for all in favor of making spend decisions during the budget process only.
Not a lawyer by a far stretch but to me, there cannot be a ceiling for debt that has already been incurred by Congress itself.
I hope this goes to the SC and the entire silly concept of debt ceiling gets busted once and for all in favor of making spend decisions during the budget process only.
Budgets, and the incurred debt from a long list of previous administrations, is not just a focus on spending, but also on income/revenue. In recent years, the biggest factor that increased our national debt, was a result of Trump and the Republicans decreasing taxes for the wealthy and corportations. It is popular to talk about "spending", but collecting income/revenue is equally important.
Fair enough, I meant spend and income decisions. Point was that the current game of passing budgets and then wrangling separately over whether to actually pay is stupid and needs to end.
One problem is that legislative Acts that are passed are applicable for years/decades and many are touted to be budget-neutral when passed. But that is based on wild guesstimates of future economy, taxes, consumer and business behaviors. Many Acts are front-loaded for benefits/effects and back-loaded for revenue generation. So, it is hard to quantify their effects on annual budget deficits.
Of course, there is an obvious budget deficit when the the FY budgets are passed, often with long delays, but that is the time to simultaneously adjust the debt-ceiling. If the FY budget is balanced, then there won't be any need to adjust the debt-ceiling.
Keep in mind that the context of the 14th Amendment was the Civil War debt but it is written in a very broad way.
Especially, in early November, after the Democrats lost their comfortable majority of the House, they should have made this issue a top priority in the remaining two months of the legislative session. After all, it was well known what the Republican strategy would be. What am I missing?
Fred
I haven't been able to find a clear article on what exactly happened, but one thing is clear: the House wouldn't have been the problem. If there was a legislative block, it was in the Senate. Dems couldn't have passed it on their own; it takes 60 votes to limit debate and bring a bill to an actual vote.
They might have used reconciliation to pass it with just D votes, but it would have taken 100% approval from the 50 D and independent/D-voting senators. Manchin and Sinema, especially Manchin, may have kiboshed it if a discussion went that far. His vote was difficult for Dems to corral all through the last Congress.
I haven't been able to find a clear article on what exactly happened, but one thing is clear: the House wouldn't have been the problem. If there was a legislative block, it was in the Senate. Dems couldn't have passed it on their own; it takes 60 votes to limit debate and bring a bill to an actual vote.
They might have used reconciliation to pass it with just D votes, but it would have taken 100% approval from the 50 D and independent/D-voting senators. Manchin and Sinema, especially Manchin, may have kiboshed it if a discussion went that far. His vote was difficult for Dems to corral all through the last Congress.
Yeah, Andy's right here. That BS 60-vote threshold * needs to go, b/c it essentially paralyzes the Senate. Heck, right now they probably can't even get 60 votes to name a post office!!!
* the fillibuster 'rule' is alleged to 'protect the minority' when in actuality it gives the minority full control. Which goes right along with how the winner of the national popular vote is seldom named President, b/c of the BS 'electoral college' nonsense.
I think we can all agree that this problem was created by Congress legislating an amount of spending that exceeded the amount of revenue legislated (taxes, etc.) plus the amount of borrowing legislated.
It used to be that Congress, via its power to borrow, legislated explicitly what was borrowed - how many bonds would be issued, at what rate of interest, for what period of time, and so on. This sort of micromanging is absurd; Congress does not have the expertise nor should it be spending time on setting I bond fixed rates. That is best done by the Treasury.
And so Congress delegated this part of the borrowing process to the Treasury. Within limits, the Treasury could even borrow in excess of budgetary needs. For example, the Treasury might borrow more now because rates were better.
But Congress did not delegate full authority to borrow willy nilly without limit. One could argue that were Congress to delegate full control of debt management to the Treasury it would be delegating a portion of its legislative power (vs. administrative authority). Delegating legislative power is unconstitutional. Full stop.
the Court would sustain delegations whenever Congress provided an intelligible principle [like a borrowing limit?] to which the President or an agency must conform.
Regarding the breadth of Section 4 of the 14th Amendment, it is worth reading the entire two sentences:
The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
That section, historians say, was added because of fears that if former Confederate states were to regain political power in Congress, lawmakers might repudiate federal debts and guarantee Confederate debt.
The best Supreme Court that money can buy might choose to read the 14th Amendment in a vacuum, but context matters.
People instinctively feel that Congress can't require borrowing and simultaneously prohibit actions necessary to service that debt. And they (we) are right. Arguably (and the SC has argued this), the 14th Amendment doesn't add anything on this point. It merely confirms what we all know, and what was true before the 14th Amendment.
We regard [the Fourteenth Amendment, in its fourth section] as confirmatory of a fundamental principle, which applies as well to the government bonds in question, and to others duly authorized by the Congress, as to those issued before the Amendment was adopted. Nor can we perceive any reason for not considering the expression "the validity of the public debt" as embracing whatever concerns the integrity of the public obligations.
JPMorgan Chase & Co. (JPM)’s Jamie Dimon took a jab at Donald Trump for encouraging Republican lawmakers to dig in over raising the debt limit even if it means default — an outcome his bank is prepping for by convening a weekly war room. “It’s one more thing he doesn’t know very much about,” Dimon said in an interview with Bloomberg Television Thursday, when asked about the former president’s comments. “Anyone who’s anyone knows that is potentially catastrophic,” he said.
@Mark. Think about this. The vast majority of one of one of the two political parties of the United States still think he is the savior. After everything that has happened. That includes the rank and file as well as the party professionals. We are gonna need a very large jail for all these co-conspirators.
@old_joe. True believers or power hungry hypocrites,,,,, America has a repuglican problem that’s destroying this country from within. And it’s not going away.
Comments
https://www.nytimes.com/2023/05/08/opinion/joe-biden-kevin-mccarthy-debt-ceiling.html
and take undignified measures
https://www.nytimes.com/2023/05/04/opinion/biden-administration-debt-republican.html
Not only can the US debt "not be questioned" but he points out that passing a budget requiring deficit spending essentially guts the 1917 debt ceiling law.
No other country in tht world manages it's finances this way
As the Treasury writes: If that delegation (subject to a debt ceiling) were unconstitutional, then all existent debt (i.e. all debt incurred since 1917) would be unconstitutional.
In order for the debt to be legal, it would be necessary to void the debt ceiling portion of the law without voiding the law in its entirety. Splitting a law like this is possible only if the law is deemed severable. Severability depends upon intent and whether the remaining portion of a law can make sense absent the portion that is excised.
Here, Congress ceded (delegated) some of its Article I authority to the executive branch, conditionally. The intent was to slacken the borrowing reins (for convenience, as noted above) without completely releasing the reins. IMHO that intent is thwarted by delegating borrowing authority absent constraints. It is not obvious that the debt ceiling could be severed from the statute. But as I indicated, that's not Tribe's argument.
Rather, he is analogizing with Lincoln's suspension of habeas corpus, that under certain exigent circumstances parts of the Constitution may be disregarded. While I'm inclined to accept that argument, his reference to Lincoln may not be on point.
The Constitution explicitly provides for the suspension of habeas corpus under certain conditions, as explained in the piece linked to from Tribe's column. The issue with Lincoln was not whether suspension of a law (habeas corpus, a law enshrined in the Constitution) was legal. Rather, the issue was who had the authority to exercise that escape clause - the executive branch, the legislative branch, or either.
Tribe might have been more persuasive by quoting https://www.americanbar.org/groups/senior_lawyers/publications/voice_of_experience/2022/july-2022/quarantine-masks-and-the-constitution/.
Especially, in early November, after the Democrats lost their comfortable majority of the House, they should have made this issue a top priority in the remaining two months of the legislative session. After all, it was well known what the Republican strategy would be. What am I missing?
Fred
@hondo- Define "better".
Lurching from self-inflicted crisis to crisis and then punting solutions until the next crisis is NOT an effective way to run a country or a company. But thanks to how the country's governance is constructed in both the state and national levels, we have the inmates running the asylum on all sides, and this is the result.
TX lack of income tax is more than offset by high property taxes, high insurance bills and bare minimum services for residents.
States cannot print their own currency so by definition they pay for their budgets by either taxes or selling bonds. Sell too many and interest rate required goes up, putting limit on debt
@msf
Thank you for the details. Very informative. To me the germane point is that the new borrowing is required to pay for debt already legislated by Congress, not new programs or spending. The Constitution says this debt “ shall not be questioned” but putting a limit on the amount that may be incurred in fact, questions it, as some bills would not be paid if there is not enough tax revenue to pay them.
Congress in fact is responsible for both the Debt that “ cannot be questioned” and for a law that says there are limits on what will be paid, until the ceiling is raised.
If they wanted to limit the debt that needed to be incurred, they should have either not passed spending bills in the past without money in the bank to pay for them, or raised taxes enough to pay the bills.
I dont see how Congress can limit debt incurred without “ Questioning “ the debt of the US.
I hope this goes to the SC and the entire silly concept of debt ceiling gets busted once and for all in favor of making spend decisions during the budget process only.
https://sacurrent.com/news/despite-tough-on-crime-claims-texas-ranks-as-one-of-most-dangerous-us-states-study-finds-30175384
https://usnews.com/news/best-states/texas
https://worldpopulationreview.com/state-rankings/best-states-for-education
https://fox7austin.com/video/1108292
If all we care about is money when it comes to government, all we get is greed.
Of course, there is an obvious budget deficit when the the FY budgets are passed, often with long delays, but that is the time to simultaneously adjust the debt-ceiling. If the FY budget is balanced, then there won't be any need to adjust the debt-ceiling.
Keep in mind that the context of the 14th Amendment was the Civil War debt but it is written in a very broad way.
They might have used reconciliation to pass it with just D votes, but it would have taken 100% approval from the 50 D and independent/D-voting senators. Manchin and Sinema, especially Manchin, may have kiboshed it if a discussion went that far. His vote was difficult for Dems to corral all through the last Congress.
* the fillibuster 'rule' is alleged to 'protect the minority' when in actuality it gives the minority full control. Which goes right along with how the winner of the national popular vote is seldom named President, b/c of the BS 'electoral college' nonsense.
It used to be that Congress, via its power to borrow, legislated explicitly what was borrowed - how many bonds would be issued, at what rate of interest, for what period of time, and so on. This sort of micromanging is absurd; Congress does not have the expertise nor should it be spending time on setting I bond fixed rates. That is best done by the Treasury.
And so Congress delegated this part of the borrowing process to the Treasury. Within limits, the Treasury could even borrow in excess of budgetary needs. For example, the Treasury might borrow more now because rates were better.
But Congress did not delegate full authority to borrow willy nilly without limit. One could argue that were Congress to delegate full control of debt management to the Treasury it would be delegating a portion of its legislative power (vs. administrative authority). Delegating legislative power is unconstitutional. Full stop.
https://www.law.cornell.edu/wex/nondelegation_doctrine (very short, simple)
https://constitution.findlaw.com/article1/annotation03.html (more depth, including quote below) Regarding the breadth of Section 4 of the 14th Amendment, it is worth reading the entire two sentences: https://constitution.congress.gov/browse/amendment-14/section-4/
As the NYTimes observed: https://www.nytimes.com/2023/05/02/us/politics/debt-limit-14th-amendment.html
The best Supreme Court that money can buy might choose to read the 14th Amendment in a vacuum, but context matters.
People instinctively feel that Congress can't require borrowing and simultaneously prohibit actions necessary to service that debt. And they (we) are right. Arguably (and the SC has argued this), the 14th Amendment doesn't add anything on this point. It merely confirms what we all know, and what was true before the 14th Amendment. Perry v. United States, 294 U.S. 330 (1935)
Excerpt from Bloomberg Media 5/11/23
Some of the "party professionals" are true believers, as is his "base".
Trump himself and the majority of the "party professionals" are true hypocrites, interested only in their own power, income, and reelection.