Why should the debt ceiling be raised?
The debt ceiling has nothing to do with meeting ones obligations to creditors.
If the debt ceiling isn't raised, simply prioritize what the country's money is going to be spent on.
The debt ceiling has nothing to do with meeting ones obligations to creditors.
If the debt ceiling isn't raised, simply prioritize what the country's money is going to be spent on.
1. That could be a form of default. Not on the U.S. debt, but on its contracts.
2. Cash flows are lumpy - that's part of why we have government debt. Even reducing all non-debt payments to zero, the U.S. Treasury will have to default at some point before mid-November. There simply isn't enough money in the U.S. Treasury's account at the Federal Reserve to keep its cheques from bouncing.
Most investors would say no. If a company is selling its cafeteria food to stay afloat, chances are (a) there won't be a company tomorrow or (b) it will find some way to repudiate inconvenient contracts, e.g. go bankrupt.
Some very smart people bought into an Argentinian oil and gas deal. Then the friendly government became less friendly and their deeds were worthless pieces of paper.
Even if you buy assets from a government in turmoil...
what is the likelihood that any new government emerging from that turmoil will allow you to keep the assets you purchased?
Historically... the odds have not been favorable to investors.
it would not be Obama who has a Constitutional/Legal crisis...
it would be the United States.
It would be, quite literally, US Law mandating the violation of ...
US Law.
OK... let's walk your suggestion through.
The President resigns.
The Vice-President succeeds.
The Vice-President is now the President.
Now the NEW President is obliged by US Law...
to violate US Law.
So we enact your solution again...
The NEW President resigns...
This time the Speaker succeeds...
The Speaker is now the President.
Now THAT new President is obliged by US Law...
to violate US Law.
So we enact your solution again...
Do you see the problem yet?
If you're really not understanding that, perhaps you should consider rephrasing your objection as a humble question.
The most likely outcome, if the executive branch has no legal course of action, is to choose the "least illegal" course of action [1]. The linked article from the Columbia Law Review has a detailed analysis of the three options. Here's the most plausible picks:
- Selective repayment. Pick and choose which payment obligations to discharge. There's obvious political issues here. Who gets paid, and who doesn't? Social security over Medicare? Military contractors over NASA?
- Increase taxation without the authorization of congress. Again, many inherently political questions. Who do we increase taxes on? In many ways, this is a mirror image of option #1.
- Issue new debt not authorized by congress. The biggest issues here are market factors, not political questions. How will the market react to this unauthorized debt? If it refuses to buy at low interest rates, this option is not likely to solve the underlying problem.
Several humerous non-options are also debunked in [1], to illustrate what "more unconstitutional" looks like:
- Sell Alaska back to the Russians. Use the proceeds to buy time.
- Mint coins, and by fiat appraise them for massive amounts. Sell them to the fed, and pay off the debt with the new funds.
Just read the article. It's a bit biased, but its analysis of options appears on the whole quite reasonable (I am not a constitutional scholar).
1. http://www.columbialawreview.org/wp-content/uploads/2012/10/...
yes, it completely does. the US does not have the cash on hand to continue paying out to its creditors. to continue to pay its creditors, it must borrow more money.