Yet, here we are again, just a week or so away from the next debt ceiling "crisis,' conveniently occurring just about the time of an off-presidential election that no one is even talking about (some local issues can be very important and with so few people voting, your vote will count more than usual).
This time around, new bills have been introduced on both sides of the aisle to pay our debts, but nothing more. These include HR692 introduced by Rep. Tom McClintock (R-CA, 4th district), which has been given an 11% chance of passage by govtrack.us since every Democrat and the president will oppose it on the grounds that it pays for no programs, but "pays China before us" as one commentator put it.
Another bill HR3807, by Rep. Mike Honda (D-CA 17th district) would raise the debt ceiling and is given 0% chance of passage in the Republican controlled House.
But there are still other ways, ways that do not require changing the debt ceiling, but allow for getting around it, permanently, so that the country is not subjected to cowardly Congressional (because Congress lacks the courage to pass spending cutting bills that they know would be universally unpopular, and almost certainly economically stultifying), back-door blackmail. Read on...
(Article originally published here on January 22, 2013)
The coin would be issued by Treasury, and under the coinage act of 1792, and many revisions beyond, we don't have to pay a private bank for the "privilege" (read: RIGHT) to make coins (thank goodness). What this would do, of course, and what terrifies the banks, is to show how money is actually created, why we can't "run out of money" and why the private central bank or its member banks should not have a monopoly to "coin Money." Article 1, Section 8 of the Constitution gives that power to Congress, and never mentions banks. Plus it would show that wealth inequality is a result of a money monopoly, not because those with all the money are so "smart" or "productive." They are mostly neither of those things, just in the rent-seeking class, able to extract wealth from the productive class through legal and financial manipulation, while doing nothing productive themselves.
Furthermore, some form of direct money issuance by Treasury is actually REQUIRED constitutionally, when Congress blocks the funds necessary to pay for what it has already approved. From Article 12, Section 9, clause 7:
"No Money shall be drawn from the Treasury, but in Consequence of Appropriation made by Law; and a regular Statement of Account of the Receipts and Expenditures of all public Money shall be published from time to time."
The president, and certainly not the Treasury Secretary, doesn't have the authority to pick and choose what to spend an insufficient supply of funds upon. The executive branch cannot choose a bit from column A and a bit less from column B and so on. It must spend 100% of the authorized amount for repayment of the debt, just as it spends 100% for the military, Social Security, the highway system, and so on.
The president must spend what he has available, and if prevented from borrowing, either direct Treasury to issue a TDC, or direct Treasury to issue debt-free U.S. Notes (aka Greenbacks) to pay everything BUT the debt. By law going back to the original legal tender act of Lincoln, Greenbacks cannot be used to pay down the federal debt, but they CAN be used to pay all other outstanding debts for goods and services, leaving the rest of the Federal Reserve created money to pay down the debt. This legal enjoinment is undoubtedly unconstitutional, but instead of challenging it, the president should go along with it and use the new Greenbacks to pay for Social Security, infrastructure, and any other expense that cannot be met with an insufficient supply of money available under the debt ceiling. In short, if Congress will not allow the money to be created, the president should do it himself.
In fact, it is the executive branch, whether the president or the Treasury, and not Congress, that is in violation of the Congress' authority under the Constitution to "tax, borrow and spend." The executive branch does not just have the "authority" to execute the will of Congress to spend on thing Congress has mandated, it has the requirement to do so.
What other support for this alternative does the Executive have when Congress has imposed an artificial debt ceiling preventing the Executive from spending to fulfill Congressional requirements, or, more accurately, those requirements that have ALREADY been met but simply not paid for (a violation of contract law with every vendor that is "stiffed")? Well, the requirement to pay the debt under the 14th Amendment has already been much discussed.
- Amendment XIV, Section 4. 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.
- Amendment XIV, Section 5.The Congress shall have power to enforce, by appropriate legislation, the provisions of this article.
However, completely unmentioned is a much older precedent set forth in the Constitution's original Article VI which says:
"All Debts contracted and Engagements entered into, before the Adoption of this Constitution, shall be as valid against the United States under this Constitution, as under the Confederation."
That is twice, once immediately after the Constitution was adopted, and again, after the divisive Civil War, that the American government has specifically promised to repay its debts in the constitution, a continuing document of rights and obligations, even at a time when debts were more onerous than now. This is a pretty clear precedent.
At the height of the Civil War, when the NY banks wanted 24-36% interest on loans to the U.S. Government, president Lincoln, and the then Treasury Secretary Salmon P. Chase, created United States Notes, directly from Treasury, debt-free, with (after the first year) no redemption in species (gold) but simply as money. The principal need not be repaid, and never specifically has been, despite a SCOTUS 8-1(!) ruling in 1884 in Julliard v. Greenman that this was only allowable under the "borrowing clause" of the constitution.
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