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Rationalization and Obligation, Part VI: What the President Ought to Do, What He Probably Will Do

This is Part V of a six part series replying to a claim by the President at his recent White House News Conference. Part I covered the News Conference and the first two (the selective default, and the exploding option) of seven options the President might use to try save the US from defaulting in the face of continued deadlock in the Congress on raising the debt limit or repealing the law enabling it in its entirety. Part II discussed Platinum Coin Seigniorage, invoking the 14th amendment to justify continuing to issue conventional Treasury debt instruments, and consols. Part III discussed premium bonds, and Treasury sales of the Government’s material and cultural assets to the Federal Reserve. Part IV, then evaluated all seven options in light of variations among them in likely degree of legal difficulties they might face, and also the likely impact of each on confidence in the bond markets, if used.

The President’s Obligations, What He Ought to Do

I think I’ve shown that the President has an obligation not to use the 14th amendment followed by continued debt issuance, because there are many other options available to stop debt ceiling terrorism when it occurs. Of course, while I’ve been writing this, the Republicans have proposed to extend the debt limit to handle deficit spending for the next 6 weeks. But they’re wanting large concessions for that. The President is supposedly still “standing firm,” rejecting the Republican proposals, and the Senate is insisting on an agreement that both ends the shutdown and ends the possibility of any further debt ceiling terrorism until after the 2014 elections. Don’t worry, however, as long as the debt limit legislation is in place, and the Republicans control the House, and we have a President who will not end the deficit terrorism/debt ceiling game we will have more debt ceiling crises.

So, let’s get back to the options. If the President is obligated to obey the 14th amendment, then he should be doing whatever he can to use the other options to end the debt ceiling crisis. He should not be playing chicken with the Republicans over the debt ceiling and the shutdown. Both are dangerous to the economy, and there is a real risk of default in allowing the Treasury’s daily available balance to fall to the level it will be at as of October 17th.

The President’s rationalization for playing debt ceiling chicken is that he has no options apart from outfacing the Republicans. I’ve outlined 6 options apart from the premature use of the 14th amendment. So clearly, there are many alternatives, and the President’s TINA framing doesn’t hold. So, I think he ought to stop rationalizing and do something apart from playing chicken.

The way the chicken game is working, both sides are now edging toward a “Grand Bargain,”/”Great Betrayal.” Americans don’t want a “Great Betrayal.” Every poll shows that most people don’t want Social Security or Medicare cut. [cont’d.]

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