Selected Reading On The Mess We’re In

Historian Sean Wilentz makes a forceful argument in favor of Obama invoking the 14th Amendment to protect the world’s economy:

… the president would have done his constitutional duty, saved the country and undoubtedly earned the gratitude of a relieved people. Then the people would find the opportunity to punish those who vandalized the Constitution and brought the country to the brink of ruin.

The New York Times editorial board is justifiably outraged that many people living in Republican-run states will still lack health insurance next year — they’ll earn too little to be covered by the Affordable Care Act and too much to be covered by Medicaid:

Their plight is a result of the Supreme Court’s decision last year that struck down the reform law’s mandatory expansion of Medicaid and made expansion optional. Every state in the Deep South except Arkansas has rejected expansion, as have Republican-led states elsewhere, [although] there is no provision in the ACA to provide health insurance subsidies for anyone below the poverty line … those people are supposed to be covered by Medicaid… Eight million Americans who are impoverished and uninsured will be ineligible for help of either kind.

Of course, Congress could easily fix this problem, but that would require You Know Who to cooperate.

At Jacobin, Shawn Gude writes about the fundamental tension between capitalism and democracy, in the context of living-wage legislation in the District of Columbia:

The controversy throws into sharp relief one of our era’s great unspoken truths: Capitalist democracy, if not an oxymoron, is less a placid pairing than an acrimonious amalgamation. The marriage that Francis Fukuyama famously pronounced eternal is in fact a union of opposites. Inherent to capitalism is inequality, fundamental to democracy is equality. Class stratification, the lifeblood of capitalism, leaves democracy comatose. The economic “base,” to put it in classical Marxian terms, actively undermines the purported values of the political superstructure.

And finally, Nobel Prize-winning economist Joseph Stiglitz argues that we can undo the decisions that got us into this mess:

We have become the advanced country with the highest level of inequality, with the greatest divide between the rich and the poor… The central message of my book, The Price of Inequality, is that all of us, rich and poor, are footing the bill for this yawning gap. And that this inequality is not inevitable. It is not … like the weather, something that just happens to us. It is not the result of the laws of nature or the laws of economics. Rather, it is something that we create, by our policies, by what we do.  

We created this inequality—chose it, really—with laws that weakened unions, that eroded our minimum wage to the lowest level, in real terms, since the 1950s, with laws that allowed CEO’s to take a bigger slice of the corporate pie, bankruptcy laws that put Wall Street’s toxic innovations ahead of workers. We made it nearly impossible for student debt to be forgiven. We underinvested in education. We taxed gamblers in the stock market at lower rates than workers, and encouraged investment overseas rather than at home.

Meanwhile, the Swiss are voting on whether to guarantee everybody a minimum monthly income of $2500 francs ($2800 dollars). They’re also voting on a proposal to limit executive pay to no more than 12 times what the company’s lowest-paid workers earn. Who knew that the businesslike, orderly Swiss were a bunch of commies? Or maybe they’re just fed up with rising inequality, even in Switzerland.

How Obama Could Protect the Economy and Get Rid of Boehner at the Same Time

The 14th Amendment was added to the U.S. Constitution in 1868 in the aftermath of the Civil War. It deals with issues resulting from that conflict. Its most famous language is the so-called “equal protection” clause: no state shall “deny to any person within its jurisdiction the equal protection of the laws”.

The rebellious Southern states were required to ratify the 14th Amendment in order to regain representation in Congress. Of course, since they were traitors (a.k.a. “rebels”), Southern politicians bitterly opposed the 14th Amendment. How dare the Federal government require that all persons, including former slaves, receive “equal protection of the laws”!

Now, 152 years after the Southern rebellion, we are facing a new crisis, primarily instigated by politicians from the same Southern states. This time it would be a financial and economic crisis, brought about by America’s failure to pay its debts. Nobody knows how the crisis would play out, but since bonds issued by the Treasury Department are the foundation of our nation’s banking system and play a vital role in the banking systems of other countries, it’s likely that America’s failure to honor its debts would do more damage to the global economy than the horrendous financial crisis of 2008.

The Constitution makes no mention of a debt ceiling. That limitation on the Treasury Department’s ability to take on new debt (i.e. to borrow money by selling government bonds) was foolishly imposed by Congress in the Liberty Bond Act of 1917. With that law, Congress gave itself the authority to set a maximum dollar amount for the federal debt, despite the fact that it’s Congress that tells the President how much money to spend when it approves the Federal budget.

Since the members of Congress are relatively sensible for the most part, they periodically raise the debt limit so the Federal government has enough money to do the various things the law requires it to do (make Medicare payments, buy cruise missiles, etc.).

If Congress refuses to raise the debt limit, therefore, the President is caught in a dilemma. He either has to borrow more money without Congressional approval or not pay what the government owes to bondholders, employees, government contractors, retirees and so on — thereby doing untold damage to the world’s economy and our own national security.

Fortunately, the 14th Amendment includes a clause devoted to the national debt. Section 4 of the amendment states:

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. But neither the United States nor any state shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

Legal scholars are now arguing about which law the President should obey. I’m not a legal scholar, but I have no doubt that the appropriate thing for the President (any President) to do if Congress fails to raise the debt limit, thereby “questioning the validity” of the public debt, is to obey the Constitution and borrow whatever funds are necessary to pay the government’s bills.

The Constitution, after all, is the “supreme law of the land”. Even crazy Tea Party people claim to honor the Constitution. The Constitution, which requires the President to “preserve, protect and defend” it, should take precedence over the Liberty Bond Act of 1917.

The last time there was a Republican-generated debt ceiling crisis, the President ruled out the 14th Amendment as a solution. At yesterday’s press conference, however, he mentioned the 14th Amendment but didn’t rule it out. He did say it isn’t a “magic bullet” and made the valid point that bonds issued without clear Congressional approval might be of questionable value. For example, buyers would probably demand higher interest rates before purchasing such government securities.

Nevertheless, it still seems that the most prudent course would be for the President to ignore the debt ceiling and continue to issue government bonds. In fact, it might be a wonderful strategy.

One likely outcome is that the Republican majority in the House of Representatives would impeach the President, just like they impeached President Clinton. But the Democrats in the Senate would never convict Obama of “high crimes and misdemeanors” for using his emergency powers to protect our national security. In fact, it’s very likely that the House Republicans would become even less popular than they are now, leading to gains for Democrats in the 2014 mid-term election.

Some recent polling suggests the Democrats might pick up as many as 30 seats in the House if the election were held today. Since they only need 18 more seats to become the majority party in the House, Obama needs to do whatever he can to maintain the Republicans’ unpopularity. Goading them into a misguided impeachment vote could do the trick, giving the Democrats control of both houses of Congress for the last two years of his Presidency. No more Speaker of the House John Boehner!

The Republicans would still have the filibuster in the Senate, of course, but that’s a topic for another day.