The twin ironies of the debt ceiling.
First, a clarification. This morning, a CBC national-affairs correspondent on "The House," the marvelous CBC Radio program devoted to all matters Parliament, gave an extended explanation of how absent a resolution to the U.S. debt-ceiling crisis by Aug. 2, "Timmy," given a U.S. Treasury bill as a downpayment on his college tuition, would discover that he now held a worthless piece of paper. Not true. Alas, my national public broadcaster misinformed me at length that America will renege on its Treasurys after Aug. 2 if the worst happens.
No. The U.S. will honor its Treasurys obligations always and forever. And it is easily able to do so. The U.S. Treasury will take in a projected $172 in revenues next month, more than enough to cover the $29 billion in principal on Treasuries that comes due in August. And as Obama decides what bills to pay, he and Geithner will make it their first priority to sustain America's creditworthiness in the world. Alexander Hamilton fought hard for this, for "the full faith and credit" of the new United States of America. Obama and Geithner at all costs will not trash that centuries' long priceless asset of global goodwill. So Timmy, hang on to that Treasury bill and when you get some spending money start buying some on your own.
Irony 1: The approximately $2 trillion worth of U.S. Treasurys held by the People's Republic of China will be honored in full - interest as it falls due, and principal at time of redemption - regardless of the hostage-taking now ongoing in D.C. (That would be the tiny Tea Party taking control of the world's lone superpower.)
Meanwhile, after honoring its Treasurys obligations to the Chinese, to Mexican monopolist biillionaire Carlos Slim, and to Hosni Mubarak (his purloined funds, stashed away outside Egypt and now frozen wherever they've been successfully located), there will be insufficient funds to pay Americans the funds they are owed.
I'll repeat that. Foreigners, including America's traditional adversaries, will be paid. Many Americans will not be.
Should there be a failure to resolve the debt-ceiling crisis, a lot of Americans are going to get stiffed. Among the vulnerable are Medicare recipients; armed forces salaries; the budgets of the DEA, FDA, CIA and FBI; farmers awaiting U.S. government agricultural-support payments; hospital, college, recreation centers, and federal and municipal buildings under construction or repair that have a federal funding component; the FAA and paychecks for air-traffic controllers; salaries for federal ports staff; oil and other industries awaiting their subsidies...
That's right: America will make good on its debts to foreigners, while at home the cutbacks will be severe, widespread and unpredictable. When the money runs out, it will be American people to suffer from the looming default.
Irony 2: Failing an debt-ceiling agreement by Tuesday, the president and his treasury secretary will take on immense new powers, at the expense of a Congress that apparently can't run a two-car funeral.
Come a default, it's for the president alone, with advice from the treasury secretary who serves at his pleasure, to decide who gets paid and who doesn't. Do I pay the farmers or make good on the oil-industry subsidies? That's a decision for Obama alone to make, without reference to Congress. He does, after all, run the government as head of the executive branch. The Tea Partiers at this point become irrelevant, as do all 535 members of the House and Senate.
What funds the U.S. government continues to take in are for the president alone to dispense. The Hill and the Supremes have nothing to say on this. The dolts who brought the debt-ceiling provision into existence in 1917 - to better ensure Congress' constitutional authority to declare war, or starve a war they didn't approve - didn't foresee that someday it could be used to cripple the Republic.
Or that it would destroy the balance of powers so obsessed over by the Founders. That it could end up investing sole power over federal spending in the executive branch - in the Oval Office - rendering the other two branches of government impotent. That was not the intent, of course: The intent was to have Congress alone empowered to authorize federal spending, and to subordinate the president. But precisely the reverse will occur in the event of a default.
So a Congress that can't say "yes" to offers by Obama that are widely regarded as generous beyond belief ("Boehner took Obama to the cleaners," one observer has it) is flirting with surrendering its power to a president it is attempting to bring down. And chronic civil-rights violators abroad needn't worry about the continued soundness of their U.S. debt obligations, while many Americans will be reneged upon by their own government. If someone explained to Americans that this is what the Tea Partiers and their GOP surrogates in Congress are about, they'd be tarred and feathered.
Paul Martin (shown), the former Canadian PM and finance minister, was also on "The House" this a.m. He was asked about the Tea Partiers' obsession with a balanced budget amendment to the U.S. constitution. You could hear him over the airwaves shaking his head. "I've found that your word is your bond. When you make a promise to the people, you can't run away from that. But when you try to legislate things, you can revoke the legislation down the road, or just weasel your way around it." (Did someone say "earmarks"?)
Students of the nearly successful Equal Rights Amendment will recall how long it took to try to change the Constitution, which is designed to be amended only with difficulty. I assume Tea Partiers and those Republicans on the Hill who are ardent about this have taken their civics lessons. Which means they must be delusional in thinking any amendment to the Constitution can be achieved in less than two or three years, especially one, like a balanced-budget amendment, that would hamstring government in times of crisis. (What followed Pearl Harbor, for instance, or the 50% jump in U.S. defense spending after 9/11 - an over-reaction, to be sure.)
This is a prime distinction between America and other advanced economies. When America describes itself as a nation of laws, not men, we're all on the same page about equal justice for all under the law. But countries outside the U.S., and conspicuously those using the British parliamentary and legal systems, do not have the rage for codifying in law everything under the sun. The understand that (a) you cannot legislate everything (morality, for instance), and that (b), as Martin said, to create a law is to invite people from all walks of life to evade it, ignore the spirit of it, break it outright or, most often, unleash a swarm of lobbyists to get another law passed that exempts certain special insterests from certain provisions of the new law.
Hence Britain doesn't have even a constitution. It gets by on common law, which is a body of precedents themselves based on shared principles. Common law is open-ended. There are no loopholes, because it is sufficiently sweeping and non-specific to cover everything. A statute, by contrasts, invites contrary interpretation as to what it means, and under what conditions, and the phases of the moon.
"I said I would eliminate our deficit come hell or high water, and I used that expression for a reason," Martin continued. "No one would forget what I'd vowed to do. There was no way I could duck accountability for my promise to the people. If we'd tried to legislate that, I could have found all manner of ways of fudging and effectively reneging. The real bond you make with your people is a straightforward promise. Everybody gets it, and there's no getting around it.
Martin, for the record, erased the $43-billion deficit inherited by the Chretien government when it came to power in 1993, and set Canada on a path to 11 consecutive budget surpluses - a record unmatched by any G-8 nation.
Martin also said - and he can do this now that he's out of office - that the debt-ceiling debacle is part of a larger self-inflicted crisis the Republicans "want to hang around Mr. Obama's neck, and they want to keep it there until November of next year. It's a wholly political crisis." Of more importance, Martin said there's no bloody way" America will resolve its own deficit and debt issues, which he described as "urgent" in the long term - for itself, Canada, Asia and especially a currently troubled Europe - without raising taxes.
Martin did not say that the level of taxation in the U.S. is at a 60-year low, or cite any others among a multitude of facts that validate his assertion.
America is starving itself to death. And yes, that is the goal of the anarchists, which, if we weren't all so polite, is the label we accurately would give the modern Republican Party. I guess you have to work inside the Beltway not to grasp that, since it's plain as day to observers from Tokyo to Beijing to Zurich. Really, unless your country was premised on a notion that government is a necessary evil, you couldn't get away with this.
Of course America will have to raise taxes. And because it can - because, as I've noted here before, America has known far, far higher tax burdens than those of this hour - it has the capacity to generate the revenue to save itself from long-term insolvency. And indeed to "Win the future," if by Obama's expression he means sustained larger investments in education, healthcare, infrastructure, 21st-century R&D and so on.
This is why we still buy U.S. Treasurys. We assume America will return to its senses. Our operating principle regarding the States continues to be Churchill's reassurance that America will do the right thing after exhausting all of the alternatives. We might be delusional ourselves in thinking this time is no different, apart from Michele Bachmann's $4,700 monthly hair and makeup tab.