The national debt is a very serious problem. How to reform Washington’s spending habits is a very serious question. And our bondholders, who are very serious people, are watching closely to make sure we are seriously going to pay off our debts.
To this point, we have. Despite much hand-wringing, partisan wrangling and a general sense of “how long can we wait before compromising,” Congress has always, for better or worse, come together to pass something. No, we haven’t cut spending nearly as much as we should have, we haven’t even touched the massive entitlement problem, and by and large we’ve kicked the can down the road; but progress is being made in fits and starts.
Part of that progress came in the fiscal cliff negotiations when Congressional Republicans were able to successfully decouple an increase in the debt limit from the continuation of the Bush-era tax cuts. This essentially assured them another bite at the deficit-cutting apple, another chance to move the United States towards fiscal sustainability.
Or so they thought. Almost immediately Nancy Pelosi tossed out a cockamamie idea to re-interpret the 14th Amendment to the Constitution so as to allow President Obama to circumvent Congress altogether and unilaterally raise the debt ceiling.
Senate Democrats jumped on board last week, sending a strongly worded letter to the President arguing that he should circumvent Congress and boost the nation’s debt ceiling if Republicans dare try and demand (gasp) spending cuts.
“In the event that Republicans make good on their threat by failing to act, or by moving unilaterally to pass a debt limit extension only as part of an unbalanced or unreasonable legislation, we believe you must be willing to take any lawful steps to ensure that America does not break its promises and trigger a global economic crisis – without congressional approval, if necessary,” the letter reads.
Apparently a certain someone didn’t pay attention in civics class. The framers of the Constitution, who had just declared their independence from Britain in no small part because of the “taxation without representation” they were forced to endure, explicitly gave the legislative branch the ultimate power to tax and spend. It’s simple checks and balances. Indeed, James Madison in the Federalist papers called the power of the purse “the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people.”
As if it weren’t clear enough the wonderful drafters of the 14th Amendment made sure to say “The Congress shall have the power to enforce, by appropriate legislation, the provisions of this article.”
If rewriting the meaning of the Constitution wasn’t going to work, Democrats had a plan B: use a legal loophole that allows the Treasury to mint platinum coins of any denomination! Under this plan the U.S. Mint would create a couple platinum coins, the President would then order them deposited at the Fed, and they’d be walked over so the Treasury could pay the bills.
The idea of using a loophole, which, by the way, was created to allow the U.S. Mint to create commemorative collector coins, to completely overturn the carefully calibrated system of monetary valuation is absurd. Inflation would run rampant. Bold holders would panic. And partisanship would become more militant than ever.
As Jon Stewart joked on the Daily Show:
“I’m not an economist, but if we’re gonna just make s*** up, I say go big or go home. How about a $20 trillion coin? Or maybe, just forget about it, do one of these ‘I was digging through the White House couch cushions and Eisenhower must have left this $100 quillion bill laying around. I know it’s real because it has our nation’s previous official seal: a unicorn felching a centaur.”
But Jon Stewart’s jokes aren’t the ones we have to worry about. We’d quickly become the joke of the world, only the punch line wouldn’t be a riot…in the literal sense. It would show, more clearly than ever thought possible, just how unserious America is about paying its debts.