But back to the current argument that it would be more “calamitous” for Biden to avoid a default than for a default to occur. It’s total bullshit. A debt repayment default would plunge the global economy into crisis. Millions of people would lose their jobs or suffer severe economic damage overnight. A default would trigger a recession that would likely snowball into a global recession. Biden invoke the 14th amendment protecting the full faith and credit of the United States would thrill political pundits and anger Republicans, but it would not plunge the nation into economic chaos.
The House does what it always does: look after America’s wealthy and corporate. That includes siding with Republicans, even when the economy is at stake. Meanwhile, small businesses — the engines of commerce the House is supposed to represent — are already feeling the effects of a possible defect. The uncertainty is enough to create real panic and impact their business.
“This really has the potential to be catastrophic,” said Rosemary Swierk, president of Direct Steel and Construction. The Washington Post. His company has federal contracts that make up about half of his revenue. “If we have to stop a project, 300 people no longer work. So what do we do ? Do we keep people on the payroll? Are they fired?
“What’s the contingency plan if we wake up on X-date and don’t have enough money to pay everyone? We just don’t know,” added David Berteau. professional services, a trade association of federal government contractors.”There’s been remarkably little visibility into what will happen if we default. Which bills will be paid and which won’t? We’re talking about paychecks , rent, contract bills, electricity bills.
The Post spoke with Andrea Kerns, who is in charge of her family’s grocery chain. They see customers already in panic mode, stocking up on cheaper meats and staples. His business is already pivoting to keep cheaper items in stock versus more expensive meats like beef, while replacing branded products with more budget-friendly store brands. This is an attempt to shore up the company in the event of a default or drastic cuts being imposed by Republicans in negotiations.
“Any pause, delay, reduction in SNAP benefits would directly affect our customers’ ability to put food on their tables and it would affect us 100%,” Karns said. “There is certainly a lot of concern about what could happen.”
This is apparently what the House and the Republicans are looking for. By all indications, they want the American people, including small businesses, feel pain and blame that pain on Joe Biden and the Democrats. They are narrative their members to encourage the Republicans to continue negotiations and inflict these painful budget cuts. So far, Biden seems ready to negotiate how much pain the rest of us will endure to keep the United States from climbing off the fiscal cliff.
Here is the full letter from the House:
Dear Mr. President:
On behalf of the United States Chamber of Commerce, I am writing today in response to the letter you received yesterday from Senator Bernie Sanders and ten of his colleagues regarding the debt ceiling and specifically with the suggestion that your administration prepares to exercise “your authority under the 14th Amendment of the Constitution.
The House is of the view that attempting to invoke the so-called “powers” under the 14th Amendment would be as economically disastrous as a default triggered by a failure to lift the debt ceiling in a timely manner.
The argument that the executive branch can simply issue new debt beyond the debt limit to ensure that the federal government has sufficient resources to meet its obligations is not supported by the text of the Constitution and ignores the obvious negative economic consequences that would occur if the administration attempted to issue such debt. The Constitution is clear, the power to “borrow money on the credit of the United States” is given to Congress (Article I, Section 8) and not to the executive.
This is supported by the full text of the 14th Amendment (notably the letter you received from Senator Sanders and colleagues omitted a fundamental clause by replacing it with an ellipsis).
Section 4 of the 14th Amendment reads in its entirety:
“The Validity of the United States Public Debt, authorized by law, including debts incurred for the payment of pensions and bonuses for services rendered in suppressing the insurrection or rebellion, shall not be called into question. But neither the United States nor any State shall assume or pay any debt or obligation incurred in favor of an insurrection or rebellion against the United States, nor any claim for the loss or emancipation of any slave ; but all such debts, obligations and claims shall be deemed unlawful and void. (Emphasis added).
Debt issued by the federal government must be issued in accordance with the law. The relevant law at this time is the Statutory Debt Limit (31 US Code § 3101). The 14th Amendment gives no authority or power to the executive branch to issue debt beyond what has been authorized through the normal process of enacting laws.
If the Treasury Department attempted to borrow money beyond the legal limit to pay government obligations, it would ignore the separation of powers enshrined in our Constitution and the validity of that debt would be immediately called into question. The invalidity of this path is underscored by your own acknowledgment that the validity of such a debt would be subject to dispute and by Secretary Yellen’s recent characterization of such a future act as “legally questionable.” Notably, such debt would not be subject to the security provided by the 14th Amendment because it would not have been “authorized by law”.
Buyers of US Treasuries, if even willing to buy issued debt above the legal limit, would demand a significant interest premium. This would in turn increase overall borrowing costs not only for the federal government, but also for the private sector, since interest rates in the private sector are often measured against US Treasury bond interest rates. . The legal uncertainty around this debt, combined with increased interest charges, would impose significant, long-term costs on the economy similar to those of a default.
Simply put, there is no alternative to reaching a bipartisan agreement to raise the legal debt ceiling. We appreciate your engagement with President McCarthy and urge you to continue your efforts to reach a successful and timely agreement.
Sincerely,
Neil L.Bradley
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Shit yeah! Democrats and Progressives simply crushed it from coast to coast on Tuesday night, so co-hosts David Nir and David Beard devote this week’s episode of ‘The Downballot’ entirely to reveling in them all. the highlights. At the very top of the list is Jacksonville, where Democrats won the mayoral race for only the second time in three decades and gave the Florida Democratic Party a much-deserved boost. Republicans also lost the mayoral office in the longtime conservative stronghold of Colorado Springs for the first time since the city began holding direct elections for the position 45 years ago.