Unless you’ve been too busy cheering for your NFL team, then you should know that the U.S. is in serious danger of defaulting its debt by NEXT WEEK if Congress doesn’t come up with measures to increase the U.S. debt ceiling.
And with no deals and compromises insight, market players are speculating on alternatives that could help the nation settle its debt.
One of the more popular options is for Obama to scrap the concept of debt ceiling altogether and declare it unconstitutional.
You read that right. Section 4 of the 14th amendment states that “the validity of the public debt of the United States… shall not be questioned.”
The provision, which was adopted in 1868, was originally meant to remove doubts on the government obligations issued during the Civil War. However, Chief Justice Evans Hughes wrote in 1935 that “its language indicates a broader connotation.”
If Obama declares this provision as unconstitutional, he’s basically saying that the concept of a debt ceiling is invalid while all debts issued by the government, regardless of the amount, are valid. Is that a loophole or what?
Before y’all get your hopes up though, you should remember that Obama isn’t seriously planning on taking this option. In fact, he has already considered AND REJECTED this option back in 2011 when the U.S. economy was also inching closer to reaching its debt ceiling.
Treasury Secretary Jack Lew has also clarified that it is up to Congress alone to raise the debt ceiling and that the President has no say about the matter.
In fact, the White House office itself declared late last week that the 14th amendment does not give the U.S. President authority to ignore the debt ceiling.
Of course, there are still other options that can be used, such as the Fed selling its assets, the Treasury printing a trillion-dollar coin, and even offering premium bonds. These don’t guarantee enough funding for the government though.
And with the U.S. so close to defaulting on its obligations, there might not even be enough demand for U.S. government bonds!
Although it seems that lawmakers are still far from reaching any form of agreement, Obama believes that Congress won’t let the U.S. economy reach default. Do you think that will be the case?