Failure To Raise The Debt Ceiling Will NOT Bring About Federal Default


ACRU Staff


November 4, 2013

This column by ACRU General Counsel Peter Ferrara was published October 15, 2013 on

When you open your monthly bill from Visa or Mastercard, have you ever thought of telling the credit card company you cannot possibly pay even the minimum balance due, and you are going to have to default on the debt, unless the company immediately increases your credit limit? What do you think your creditor would tell you if you did? Would you expect to get the increase in your credit limit that way?

That is the same silly, illogical argument that your President Barack Obama is peddling to the entire country, to considerable success, given the fundamental breakdown in this generation’s ability to handle self-government. Not raising the debt limit does not mean defaulting on the national debt, any more than not increasing your credit limit means you can’t pay your monthly credit card bill, and must default on that.

As the outstanding federal debt becomes due, it can simply be paid by newly issued debt, without violating the debt limit, as the total outstanding debt would not change. President Obama’s own budget estimates total net interest on the national debt for this year currently totals $223 billion. But his budget also estimates total federal income taxes for this year at $1.7 trillion, or $1,700 billion. So just as you use a small portion of your monthly earnings to pay your credit card bill, current federal tax revenues are more than enough to pay the current interest due on the national debt. So not increasing the national debt does not mean defaulting on the national debt. QED.

But our party controlled press, like the Washington Post and the New York Times, which behave voluntarily in regard to the Obama Administration just as Pravda did under compulsion in regard to the old Soviet dictators, foolishly echo this Obama party propaganda, “reporting” that default on the national debt is imminent unless Congress increases the debt limit. Even some conservative commentators have been buffaloed into lamely repeating that such default is at issue in the debt limit debate. There should be personal liability for commentator malpractice.

But President Obama says without increasing the debt limit, he cannot cover all of the federal government’s spending for the year, and he cannot decide what to prioritize to spend the continuing federal income on first. But this is why with no executive experience, or any other experience except rabble rousing, he had no business running for President in the first place.

As a former Associate Deputy Attorney General of the United States, a member of the Bar of the United States Supreme Court, and an honors graduate of Harvard Law School, in my opinion it would be an impeachable offense for President Obama to default on the national debt in violation of the Constitution when he has the available resources. Perhaps the House Judiciary Committee opening impeachment hearings and taking testimony on this point would help President Obama decide how to prioritize.

But President Obama says Congress must raise the debt limit just to pay the bills we already owe. But if you gain a credit limit increase on your credit card, and you charge still more, is that paying the bills you already owe? Or is that racking up still more bills?

Similarly, raising the debt limit so the federal government, with nearly $17 trillion in national debt (more than our entire economy), can borrow still more does not involve paying the bills we already owe. It means racking up new bills to be paid in the future, by our kids. At best, if the increased borrowing is used to pay current federal bills owed, that involves deferring payment of current obligations, not paying what we already owe.

But President Obama is doing a good job of just confusing and manipulating the American people on this issue, as too many voters do not understand federal finances. But that does not mean they refrain from voting when they don’t understand the issues.

The latest news is that Senate Democrats are demanding to increase the debt limit and reopen the government that Republicans agree to replace the sequester spending cuts with tax increases, and to scrap the long term budget caps adopted in the 2011 debt limit deal. President Obama has been calling for precisely that all year, and it is in the Senate Democrat budget passed earlier this year.

The sequester and the spending caps have amounted to the most successful federal budget restraint in 50 years. Under those policies, total federal spending in actual, nominal dollars has actually declined for two years in a row, which almost never happens even for one year, and has not happened for two consecutive years since the end of the Korean War. The Wall Street Journal reported yesterday that through the first 11 months of the 2013 fiscal year, federal spending was down $127 billion over last year. The sequester and the budget caps now require still more spending cuts for 2014.

This debate clearly defines a difference between the two parties. The Democrats want to repeal and replace the spending cuts with still another tax increase. The Republicans won these budget cuts in the 2011 debt limit deal, and to President Obama’s shock, they want to keep them (though there are big spending Republican dissenters).

The Republican House majority in fact does have the power to resolve the debt limit impasse, and the government shutdown, on their own, if they would just wake up. But that would involve explaining to the American people how passing a federal bill works, and if you have to depend on the Republicans explaining anything, you can just forget about it.

The Republican House majority should just pass the debt limit increase as they want it, with the sequester and the budget caps all remaining in place. They do not need agreement from President Obama or Harry Reid to do that. If the Democrat majority Senate disagrees, they can just go pass the debt limit increase bill as they favor it. Then the regular, established procedure for enacting legislation is for the House and Senate to both go to a Conference Committee and work out the final compromise.

If the House leadership would just pass the debt limit bill as they prefer it, they can explain to the nation that they have done their job, and they are waiting for the Democrats to act. Then if the Democrats do not pass their bill, or do not show up at the Conference Committee, then it will be clear to the whole country who is responsible for failing to raise the debt limit. If the House Leadership cannot get this, then they must be replaced. Newt Gingrich is still eligible to serve as Speaker, and I am sure he can explain it to the public. This same procedure is available if a short term agreement has extended the debt limit debate to a later date.

Of course, President Obama can then still veto whatever the Conference Committee comes up with. But then it would be clear exactly who is refusing to raise the debt ceiling, even in the face of a bipartisan Congressional agreement on the issue. And if he is going to be blamed rather than the Republicans, he will yield.

The exact same procedure can and should be used to resolve the government shutdown issue, now or at the time to which any short term agreement has extended the issue. The government is regularly funded by 13 or more appropriations bills, not by Continuing Resolution (CR). It is the CR that puts the shutdown of the entire federal government at issue, because the CR is inherently an all or nothing measure.

What House Republicans need to do is finish passing the rest of the Appropriations bills on an expedited basis, under closed, accelerated rul
es. Then the Republicans can explain to the nation that they have fully funded the government, and that nothing further can move forward until the Democrat majority passes their Appropriations bills, and then the matter goes to the Conference to resolve any issues. If Senate Democrats do not pass their Appropriations bills, or show up at the Conference, then it will again be clear to the entire nation who is responsible for the government shutdown.

Democrats have said they will not fund the government piecemeal, only all or nothing. But contrary to this posturing public manipulation, the federal government is regularly funded piecemeal, through this appropriations process.

The government has been shutdown only because President Obama and the Democrats have been so sure that the Republicans will be blamed for it. Once Obama and the Democrats are themselves put on the spot, through the Appropriations process, then they will quickly agree to compromise the issues.

Through that Appropriations regular order, the Republicans can even still pursue defunding Obamacare, because they could do so making only the HHS Appropriations bill the issue, meaning only HHS would be shut down (possibly the IRS and the Office of Personnel Management too). That is another advantage of restoring the Appropriations regular order.



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