Word is that debt ceiling hostage taking will now be the new normal. This is according to Sen. Mitch McConnell, who should know. Michael Shear writes,
The very real threat of forcing the nation into a first-ever financial default — along with the potential for economic calamity — will forever be a powerful tool used by lawmakers and presidents alike, the Senate’s top Republican predicted.
“Never again will any president, from either party, be allowed to raise the debt ceiling without being held accountable for it by the American people and without having to engage in the kind of debate we’ve just come through,” Mr. McConnell said moments before the Senate vote on the deal he worked out to raise the debt ceiling by $2.1 trillion.
Previously, I’ve compared the debt ceiling to a bomb ticking away at the base of the economy. We don’t much notice it because it’s always been there and, despite a couple of close calls, it’s never gone off. But that doesn’t mean it won’t ever go off. Particularly if these sorts of showdowns become the norm.
And even if it doesn’t go off, Congress’s decision to make the risk of default more visible might well be enough to scare the markets. If you were an investor, would you want to put your money in a country that regularly held bitter partisan brawls over whether you would be paid back? Or would, say, German bonds begin looking like a comparatively better bet?
Just getting close to default caused the world’s economy to stumble, according to Reuters. And Ezra’s right; if the U.S. goes through this same game every few months, investors are going to think twice about investing here.
The debt ceiling is merely a procedural device. It’s a way for Congress to give blanket authorization to the Treasury Department to eliminate having to vote on every separate bond issue. Most nations manage their finances some other way.
However, if we eliminate the debt ceiling, what will take its place that wouldn’t require a constitutional amendment? The Constitution gives responsibility for managing public debt to Congress. I believe we all agree that we don’t want to go back to the practice of requiring a vote on every separate bond issue.
Shearer has what might be a workable idea –
Democratic lawmakers repeatedly argued over the last several weeks that a little-studied section of the 14th Amendment to the Constitution gave Mr. Obama (and future presidents) the authority to simply raise the debt ceiling without waiting for Congress to act.
“The validity of the public debt of the United States, authorized by law, including debts incurred for payments of pensions and bounties for services in suppressing insurrection or rebellion shall not be questioned,” the section reads.
An executive order by Mr. Obama could seek to clarify that section, perhaps written to apply only to future presidents to avoid the impression of a power grab. That might lessen the ability of future Congresses to play games of chicken over the debt ceiling.
Or, perhaps he could write the order to go into effect on January 21, 2013, which is the day after the next presidential inauguration. The current debt ceiling deal ought to make it possible for the nation to hold out until then.