Flee to Mars if America commits worst error since 1931
By Ambrose Evans-Pritchard
July 27th, 2011
President Obama has categorically ruled out a constitutional challenge to the US debt ceiling since I wrote yesterday’s blog.
Spokesman Jay Carney said the White House cannot invoke the 14th Amendment, which stipulates that US federal debt “shall not be questioned”.
“It’s not available. The Constitution makes clear that Congress has the authority, not the president, to borrow money and only Congress can increase the statutory debt ceiling. That is just a reality,” he said.
That is questionable, but let us move on.
Obama had previously been vague about this, saying White House lawyers were “not persuaded that is a winning argument”. It is a revealing turn of phrase. This is indeed about winning arguments, not abiding by constitutional law.
It is understandable why he should wish to avoid to an end-run around Congress in this violently polarized atmosphere, though it would not have stopped have FDR. (He went much further by stacking the Supreme Court).
However, the 14th Amendment still binds the nation. The US cannot miss a coupon payment on past debt without breaching the nation’s highest law, and without defiling the honour of the United States.
So this shifts the balance of probabilities a little further towards a brutal fiscal shock as spending is cut to meet the debt ceiling, if Congressional leaders fail to marshal their troops in any semblance of order over coming days.
Since tax revenues cover just 60pc of the federal budget, the squeeze would have to be on a scale large enough within a few months to tip the US economy into a downward spiral and take the world with it.