Team Obama Fiddles While Debt Ceiling Fires Burn.....you know things have gotten really bad when you realize having Larry Summers back in a position of authority would probably have led to less stupidity than what we are seeing now. As bad as many of his reflexes are, Obama and Geithner’s are even worse.
....... Obama has claims that his lawyers told him that he could not use the 14th Amendment to ignore the debt ceiling. But the few precedents suggest otherwise, and opinion is certain to be divided enough among authorities that the President could easily have found legal cover if he wanted to (the Administration has had no compunctions on taking aggressive positions on habeas corpus and a raft of other Constitutional issues).
......Yale constitutional scholar Jack Balkin wrote today (hat tip Arthur) of three additional routes the President could use to work around the debt ceiling. One is the coin seigniorage idea that has been discussed here and on other sites.
Another is the “exploding option”:
The government can also raise money through sales: For example, it could sell the Federal Reserve an option to purchase government property for $2 trillion. The Fed would then credit the proceeds to the government’s checking account. Once Congress lifts the debt ceiling, the president could buy back the option for a dollar, or the option could simply expire in 90 days.
Balkin also argues for a third route, effectively, that the President can’t use the 14th Amendment casually, but could when circumstances became more extreme:
If the president reasonably believes that the public debt will be put in question… Section 4
comes into play once again. His predicament is caused by the combination of statutes that authorize and limit what he can do: He must pay appropriated monies, but he may not print new currency and he may not float new debt. If this combination of contradictory commands would cause him to violate Section 4, then he has a constitutional duty to treat at least one of the laws as unconstitutional as applied to the current circumstances.
snip
But a related question is why is the Administration not doing a better (as in any) job of crisis preparation as a way of calming rattled nerves? Of course, part of the answer is that since this is a manufactured crisis, they really feel they need to keep the heat on and are locked into their current strategy. But a piece by Gillian Tett of the Financial Times lists five areas where the Fed and Treasury owe the public answers on what takes place if there is no debt deal before official finances become strained. I’m not in agreement with all the questions on her list. For instance.....
http://www.nakedcapitalism.com/2011/07/team-obama-fiddles-while-debt-ceiling-fires-burn.html
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