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Whose Fault Would Default Be?

President Obama is trying to establish the idea that any default on the national debt will be 100 percent the fault of the House Republicans. He has said, for instance, that Congress must “remove the threat of default and vote to raise the debt ceiling.” The treasury secretary, Jack Lew, said on Sunday that the administration would have “no option” to prevent a default.

But this is nonsense. The president is bound by his oath to uphold the Constitution and, as the distinguished–and liberal–historian Sean Wilentz points out in the New York Times today the 14th Amendment says that “the validity of the public debt of the United States, authorized by law” is sacrosanct and “shall not be questioned.” He
points out that the language was put in the 14th Amendment precisely to prevent Congress from welching on the enormous debt run up during the Civil War.

In an emergency, the president can certainly act to prevent a default, and thus uphold the constitutional mandate. Indeed, he would be violating his oath of office not to.

Default is nothing more than a failure to pay the interest and principal due on a debt in a timely manner. According to figures in a Power Line post, right now the government is spending about $17 billion every business day. It takes in about $14 billion in revenues. Thus it needs to borrow about $3 billion every business day to make up the difference.

A failure to raise the debt ceiling would prevent the government from borrowing that money. But it would not prevent the government from paying the interest on the debt, which amounts to only about 8 percent of revenues. Nor would it prevent the government from rolling over existing debt, which it does routinely.

What it would have to do is prioritize what bills it pays, leaving some unpaid. Families often have to do this to cover temporary cash shortfalls and there’s not a reason in the world the treasury can’t do the same. It would be embarrassing, to be sure, for the richest country on earth to have to stiff a few creditors for a while, but it would not be a default and would have few if any global financial consequences. States often do this, including Obama’s Illinois, which has debt problems that make the federal government’s look like a day at the beach.

So if this country defaults on its debt, it will be 100 percent the fault of President Obama. He has the power to prevent it. He needs only to exercise it.


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