Archive for July, 2011

15
Jul

One More Myth about the Debt Celing Disaster

   Posted by: Robert    in Law, Politics

I was recently linked to an article written by John Lott seeking to bust certain myths being talked about in the media regarding the debt ceiling.  His article, overall, accomplishes the goal he sets out to accomplish.  In busting his first myth, he tells us that “The 14th Amendment to the Constitution requires that the debt payments come first before any other spending,” and continues that logic through at least one more myth.  Unfortunately, the 14th Amendment says no such thing.

What the 14th Amendment says is that “The validity of the public debt … shall not be questioned.”  By their plain meaning, these words say nothing about the debt ceiling (which didn’t even exist at the time) or how the country’s debts will be paid.  They say only that the validity of the debt shall not be questioned.

To explain what those words mean, consider an analogy.  An American family with a mortgage and credit cards has used tools of debt to build up a lifestyle at the edge of — or beyond — their financial means.  The charges are accurate: the student loans covered earning a degree; the mortgage bought a house; and the credit card bought furniture, electronics, other items, and maybe even a utility bill or two.  Out of cash, and with credit cards at their limit, the family receives a bill in the mail.  The family now has a “crisis” to work through:  How do they handle the bills?

One choice that the family has is to pay some bills right away and put off others until later.  Another choice is to find new sources of debt to cover the bills.  Yet a third choice would be to throw the bills in the trash and, when the bill collectors call, tell them you don’t actually owe that money for some reason or other.

The 14th Amendment takes Option 3 off the table, but leaves the other two alone.

The Public Debt Clause was written at a time when the country had just amassed what was then a significant amount of public debt.  The Clause was written to provide certainty as to how the government would manage those obligations.  What it said is that the United States would not tear up its bills.

But other than telling its creditors to pound sand, the government can do nearly anything it wants with its debt.  A great many proposals have already made their way into the debate, some of which are more fact based than others.  Unfortunately for the author, thinking that the Constitution has already solved the problem falls squarely into the “others” category.  Our looming “disaster” will have no such easy answer.