Naive question on the current Debt Ceiling impasse.

[Adsos Letter]

If President Obama has to go to the 14th Amendment option in order to get the debt ceiling raised, will that be received negatively by the buyers of US bonds? I'm thinking specifically of China.

I suppose they don't want us to default, but even with the ceiling raised how much more will they be willing to purchase? Especially if it appears that extreme measures have to be taken within our government (between the parties) in order to keep us afloat.

I suspect the answer is a no brainer; my knowledge of economics is limited to keeping our household budget balanced.

Oh, and some vague memory of a whiskey vs. milk equation from my Econ101 days.

[DJ13]

1. I would think a display that the Constitution protects investing in US Treasuries

would be a huge plus in maintaining confidence with foreign investors.

It would signal that no matter how nuts one political party is, their investments wont be defaulted on.

[Adsos Letter]

2. Thanks; that makes sense.

[Name removed]

8. Deleted message

Message removed by moderator. Click here to review the message board rules.

[DJ13]

9. Its in the Constitution, how is that "circumventing" the Constitution?

:eyes:

[EC]

13. How is doing what the Constitution edicts

circumventing it?

[girl gone mad]

15. If the premium rises significantly at any time during this "crisis", I'll be buying with both hands.

ETA: since his comment was deleted, he asked if investors would have confidence buying US debt "with the executive trying to circumvent the constitution and the powers vested in congress?"

All the confidence in the world. That's my answer.

[TBMASE]

3. Anyone who thinks the president can usurp the power of congress

is going to get a rude awakening.
The Executive cannot incur more debt than what has been set as law by congress. Nothing in the 14th amendment gives the executive branch the ability to borrow money in excess of the debt ceiling. Nothing gives the executive the power of the purse.

the Gopers will blink. It's a no win situation for them.

[KittyWampus]

4. You are most likely correct.

[murielm99]

5. It's a no win situation for everyone.

If Obama caves, if the Democrats in the House and Senate cave, we are done, too. We can kiss the next election goodbye.

[LiberalAndProud]

6. I hope it doesn'tcome to that, at any rate.

I'm certain it won't be invoked except as an extreme emergency measure, even if it does apply, which I don't pretend to know.

But hasn't the GOP backed itself into a tight corner? How do they maneuver around their obstinant stance that loopholes, taxes and subsidies are all off the table? It seems to me they've left themselves in a situation where they have to force a default and then take the fall for it, or piss off the TPers.

[TBMASE]

7. I'm certain the 14th doesn't transfer the authority from congress

to the executive branch the power to accrue debt or spend a single dime of money without a bill from congress so I don't know what they plan to invoke that doesn't cause a constitutional crisis, which will do nothing to make investors feel secure about investing in any US Debt

And the GOP is in a corner, they default they take the hit.

[tkmorris]

10. the 14th does seem to imply that our debt cannot be defaulted upon

Honestly I find the wording of it vague almost to the point of meaninglessness, however it could certainly be argued that any law (debt ceiling) which inhibits the honoring of our national debt violates the amendment. The counter-argument might be that the debt ceiling does not specifically inhibit payment of debt or interest thereon, except in circumstances where the payments exceed IN FULL the debt ceiling. In other words, the payment of debt and interest must be accounted for before any other federal expenditures, and if that must be accomplished by retasking funding that had previously been provided for within the budget than so be it.

I think it's all moot anyway. NO one wants the courts to have to decide how the 14th impacts on the debt ceiling. Doing so would of itself shake confidence in our debt and in the dollar, whatever the outcome.

[Adsos Letter]

12. "NO one wants the courts to have to decide how the 14th impacts on the debt ceiling..."

"Doing so would of itself shake confidence in our debt and in the dollar, whatever the outcome."

Thankyou; this was actually my primary concern, not the issue of where the power of the purse resides although that is an integral part of the issue.

edited to add: "although that is an integral part of the issue."

[HappyCynic]

14. There may be a way...

I think the GOP has largely backed itself into a corner but there may be a way for them to come out of it without defaulting and minimizing the damage. Here's my analysis of the situation, which should be taken with a boulder of salt, as my knowledge of politics and economics (other than "I read some stuff on the internet") is on par with your dog's understanding of quantum physics.
Boehner has apparently scaled back the negotiations, the White House's refusal to back down over tax changes. This actually may provide them the framework for an escape. The basic problem is the debt ceiling needs to be raised and the Dems and the GOP (at least the non-lunatic fringe elements) both realize this but emotions are so high that neither side can publicly allow a defeat. So, both sides need to declare victory in some form or another. But let's examine what each side needs to declare victory:
Dems:
- Debt ceiling raised
- No benefits cuts to social security or medicare (even better if these programs are not touched at all)
- No major cuts to other programs
GOP:
- No tax "hikes" (which includes closing loopholes)
- Spending cuts
You'll notice that the two aren't really mutually exclusive. And that's what may lead to a way out. With the rejection of the "grand deal", and with the deadline fast approaching, the bill could be scaled back further until it is essentially a debt ceiling increase and a few minor cuts to non-SS and non-Medicare programs. (Note that I only mean minor in terms of the overall budget - depending on the programs cut, the reduced funding could still hurt.)
The Dems will be allowed to declare victory, as the ceiling was raised and there were no major concessions. The GOP can declare victory by saying they got some spending cuts and stopped the Dems from raising taxes. Media-wise, given how "liberal" the media is, it will probably be painted as a loss for Dems, with Obama "caving" or as the GOP "gaining spending cuts".

[Ozymanithrax]

11. If it is used, they will say it invalidates the debt ceiling law...

and that When the Congress passed a budget borrowing money it carried in implicit authority to pay back the debt. It does have the affect of weakening Congresses power and giving more power to the executive. I think they will blink and sign some kind of bill extending the debt ceiling rather than make it a constitutional issue.

[Adsos Letter]

17. "...extending the debt ceiling rather than make it a constitutional issue."

That is really what I was driving at in my question; whether turning the debt ceiling issue into a constitutional issue would make foreign purchasers less willing to fund our debt.

Thanks for your answer.

[Ozymanithrax]

20. Don't think our creditors give a damn about how we keep payng our bills...

so long as we keep paying them.

Now, if the Republican Congress tried to take the issue to the Supreme Court in order to force the President to stop trying to pay the bills, and stopped them it would have cause problems.

[LiberalAndProud]

19. But didn't I see the word "impeachment" bandied about?

Maybe they're just trying to force Obama into an impeachable breach? I wouldn't put such short sighted behavior past this bunch of hoodlums.

[Ozymanithrax]

21. They could impeach hm in the House...

but the trial is in the Senate, and I don't think they would get the conviction. First, they would try to get the Supreme Court to decide whether it is Constitutional.

[MilesColtrane]

16. Political turmoil and fundamental Constitutional challenges are never good for business.

If Obama were to try it, which he won't, it would end up as a question for the Supreme Court, which I believe would come down on the side of Congress.

With all of that going on, and no predictable outcome, foreign investors would think twice about buying Treasury bonds and doubling down on what they are already owed by the U.S.

[Adsos Letter]

18. Thankyou; your answer is more to the point of my question

than the issue of where the power of the purse lies.

edit: an unfortunate spelling error. :blush: