Obama’s Fall-Back Position on a Default

Written by Gary North  via The Tea Party Economist


The United States Constitution is clear: “All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.” (Article I, Section 7)

If the Republicans decide not to submit a budget, the government will shut down. That is what we are being told. But is this correct?

If the Republicans do not submit a budget that the Senate and the President sign into law, the Treasury Department will run out of ways to cook the books this month. It will have to stop paying interest on the federal debt. That will harm the “full faith and credit of the United States,” which is the traditional mantra of those who favor unlimited debt for the federal government. That would increase risk for debt-holders. The government’s credit rating would fall. But is this correct?

Let us assume that the biggest bankers decide that a cessation of debt payments would be pending.  The banking industry has remained silent on this so far. Here is a huge story, we are told, but we do not see warnings being issued by the American Bankers Association.

What if, on October 17, the day the Treasury runs out of games to lock in the debt of the government at $16.7 trillion, the House still does not submit a budget. The Treasury supposedly will not be able to borrow any more money. Legally, the government will be unable to fund whatever the borrowed money would have been used for.

For a while, the President will decry all this. He will blame the Republicans for not doing what he wants them to do.

The two sides will assess political damage. But the government will not be able to pay all of its bills. Increases in the federal deficit will end. We will get a balanced budget.

What if the Republicans do not capitulate before the government’s inability to borrow forces budget cuts in the Defense Department and discretionary spending? Is the solvency of the government really at stake?

No. Because Obama can issue an executive order that orders the Treasury to borrow.

Why not? The President issues lots of these orders. Why not another one?

Would he be impeached by the House? Probably not. If he is impeached in a long trial, will the Senate convict? No.

Who can tell the President to rescind such an order? Not Congress. The Senate will not issue such an order to the President.

This country has a Constitution. But it is interpreted by the President. He decides what to enforce, and how to enforce it. The Supreme Court decides cases. But would it decide in favor of the House? This is not clear. Besides, it could decide not to hear the case.

The President can play chicken with the House. The furloughs will stand.

He can cut defense spending to keep the government afloat.

Or he can bite the bullet in the name of government solvency and sign an executive order authorizing the Treasury to borrow. Who is to say he can’t? Boehner?

It is all politics. The Constitution is honored when it is convenient. It is ignored when politicians decide to ignore it. When a President decides to go to war without a declaration of war, he does. Obama threatened this with Syria. Putin outfoxed him with the chemical weapons ploy, but that was a matter of politics, not the Constitution.

We may get to see the credit ratings agencies downgrade federal debt. But as for the government shutting down completely, the threat is not credible.


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About Land & Livestock Interntional, Inc.

Land and Livestock International, Inc. is a leading agribusiness management firm providing a complete line of services to the range livestock industry. We believe that private property is the foundation of America. Private property and free markets go hand in hand—without property there is no freedom. We also believe that free markets, not government intervention, hold the key to natural resource conservation and environmental preservation. No government bureaucrat can (or will) understand and treat the land with as much respect as its owner. The bureaucrat simply does not have the same motives as does the owner of a capital interest in the property. Our specialty is the working livestock ranch simply because there are so many very good reasons for owning such a property. We provide educational, management and consulting services with a focus on ecologically and financially sustainable land management that will enhance natural processes (water and mineral cycles, energy flow and community dynamics) while enhancing profits and steadily building wealth.
This entry was posted in Austrian Economic Theory, Collapse of the Empire, Constitutional Government, Government Corruption, Government Failures, Government Propaganda, Money and Banking, Obama Care and tagged , , , , , , , , . Bookmark the permalink.

2 Responses to Obama’s Fall-Back Position on a Default

  1. Gunny G says:

    Reblogged this on Dick.G, AMERICAN ~ BLOGGING BAD… and commented:
    GUNNY G!


  2. incaunipocrit says:

    Reblogged this on The International Blogspaper.


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