Opinion

The Great Debate

Tea Party zealots hold the public debate hostage

This year’s contrived budget crisis is headed to its climax, as the date for defaulting on the nation’s debt approaches.

Washington’s budget debates are dizzying and incomprehensible. But at stake is what kind of country we will have. House Republican Tea Party zealots, backed by well-funded right-wing lobbies, continue to manufacture budget crises. They want to alarm Americans into accepting cuts in basic security — in food stamps, and home heating, in Social Security or Medicare benefits — that would otherwise be utterly unacceptable.

Lost in the uproar is any reasoned discussion of the real strategies we need to make this economy work for working people. It is vital that the president and the Democrats in Congress end this macabre dance and make it clear to people just what the stakes actually are. The measure of any compromise deal is whether it will crush the hostage-takers.

Last week, Tea Party Republicans finally blinked. The big money that drove the effort to hold government hostage in order to defund, or at least delay, Obamacare called off the dogs. With catastrophic financial default looming, and Republicans already plummeting in polls measuring voter approval, the lavishly funded right-wing lobby groups — Heritage Action for America, the Koch Brothers’ Americans for Prosperity, the Club for Growth — unfurled the white flag, announcing that they would not punish House Republicans for voting for a short-term hike in the debt ceiling.

Simultaneously, conservative business money — the U.S. Chamber of Commerce, the National Association of Manufacturers, and others — carefully leaked plans to protect incumbents in primaries against zealous Tea Party challengers. The Koch Brothers took a step back; the corporate and bank money looked to limit the damage.

A 14th Amendment for all centuries

During the 1980s, a colorful Washington figure used to stand in Lafayette Square near the White House holding a sign: “Arrest Me. I Question the Validity of the Public Debt. Repeal Section 4, Fourteenth Amendment to the U.S. Constitution.” That section reads: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” As far as I know, the whimsical “protester” was never arrested; he wasn’t breaking any law. Congressional Republicans, if they force the United States into default on its debt, will be.

Even most journalists and policy wonks hadn’t heard of Section 4 until recently. But with a default on “the public debt” increasingly possible, many now find the subject gripping. What if the House Republican majority decides that they are just too angry to authorize repayment of the debt? They’d be violating the Constitution — but what would happen to the country, and to them?

During the debt-ceiling crisis of 2011, a number of scholars, including me, suggested that President Obama could end the standoff by proclaiming that Section 4 required him, as part of his duty to “take care that the laws be faithfully executed,” to set aside the debt ceiling and borrow enough money to fund payments on the debt. Obama later said his lawyers told him that was “not a winning argument.” This time around, White House Press Secretary Jay Carney has already said that “this administration does not believe that the 14th Amendment gives the power to the president to ignore the debt ceiling.”

In praise of default

Join us for a live chat today at 1 p.m. ET with James, who will be taking questions about his piece.

Call me a default-ista.

For a huge number of borrowers, be they U.S. homeowners or the sovereign nation of Greece, a default or radical rescheduling of debt might just be the best, most practicable option.

More to the point, default in many of these situations may be not just in the best interests of the debtor but of the economy as a whole.

Greece should default and reschedule

The drama unfolding in Athens contains all the usual ingredients for a modern crisis. Poorly disclosed derivative transactions. Inadequate accounting for off-balance sheet liabilities. Investment banks eager to structure complex transactions in return for fat fees. And a furtive but gullible government that thought it could get something for nothing.

Life is a lottery; some loans go wrong in the ordinary course of events. But behind every really bad loan or class of loans, like subprime mortgages, there are greedy and foolish bankers and equally culpable borrowers. Greece is no exception.

The Greek state has only itself to blame for manipulating accounting rules and derivatives markets to run up unsustainable debts. But the banks that structured those transactions are hardly blameless and cannot really complain if they do not get all their money back.

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