It looks as if I'm going to have to order more popcorn for 2013. The financial to-and-fro in the USA is providing near-non-stop entertainment. The latest round of catfighting is regarding the paltry hard limit of $16.4tn on the US debt, which the USA has already hit and is conducting temporary measures to avoid increasing - but come February the limit of temporary work-arounds is reached, and the USA cannot spend itself into debt any more until the debt ceiling is raised.
Is it just me, or does anyone else think that the BBC is a little light on investigative journalism in its piece on the matter?
He [Obama] demanded that Republicans in charge of the House of Representatives approve a rise in the federal government's authority to borrow money to pay existing obligations - without seeking policy concessions in return.Did you notice the mismatch? Obama is claiming that if the debt limit is not extended (because the Republicans control Congress, and could block a debt limit extension) then the USA is going to fail to pay its bills, and that will be All The Fault Of The GOP. Except - well, except for Section 4 of the 14th Amendment to the Constitution of the United States:
"The full faith and credit of the United States of America is not a bargaining chip. And they [Republicans] better decide quickly because time is running short," Mr Obama said.
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.Legally, the implication of this (according to legal scholars greater than I) is that debt payments have the first claim on US government spending:
Last I checked, pretty much every appropriations bill starts with a statement equivalent to this (from HR 6091, the appropriations bill for Interior last year): "Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the following sums are appropriated, out of any money in the Treasury not otherwise appropriated, for the Department of the Interior, environment, and related agencies for the fiscal year ending September 30, 2013, and for other purposes, namely:..."So there's no danger of the USA actually defaulting on its debt, since debt payments go to the head of the line. It's the spending after that which is the problem.
To my reading, that says that the money is only appropriated if there is money in the Treasury that isn't already appropriate. Since the 14th Amendment requires that we pay our debts, the appropriations for debt servicing would have to go to the front of the line. Anything after that would purely be on the basis of what money is available in the Treasury.
The US tax take is currently about 60% of its spending, so the effect of this restriction would be that the US would have to immediately cut its expenditure by 40%. Now, this is going to result in horrible cuts to entitlements (Social Security, Medicare, Medicaid), defence, and "discretionary" spending is really going to get it in the shorts, but the US government will not default on its debt no matter what the President claims.
One wonders what the BBC's Washington correspondent believes his job is, if not to do some basic journalism on the claims of politicians.