Washington - The Reuters exclusive hit the financial and political world like a clap of lightning from a summer thunderhead.Caught between a rock and a hard place, Treasury officials have been exploring constitutional remedies to Republican threats to cut off their ability to borrow money.
The conflict: The U.S. Treasury needs to borrow $125 billion each month to keep the nation from going into financial default on its debt to creditors, including the Federal Reserve banking system.
Congress has authorized a debt ceiling of $14.3 trillion.
The question: Is the concept – that of Congress imposing levels of debt - even constitutional?
The 14th Amendment seems to say no, it's not. To cut pensions or benefits is to deprive persons of life, liberty, or property, without due process of law” - or, at the least, “the equal protection of the laws.”
GOP Senators and Congressmen say yes. Democrats from the other side of the aisle and the Obama Administration say no.
Section 1. All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws...
...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...
Additionally, the Treasury officials are seeking a way for the New York Federal Reserve Bank to serve as a broker for the Treasury if a deal to raise the borrowing cap cannot be reached on time. Treasury officials have also explored the possibility of prioritizing payments to the nation's creditors.
Assistant Secretary of the Treasury for Financial Markets Mary Miller is spearheading the secret effort to find a solution to the desired action of borrowing $2 trillion to last the nation until after the general elections of 2012.
President Obama reportedly dismissed the question, saying “I don't think we should even get to the constitutional issue. Congress has a responsibility to make suree we pay our bills. We've always paid them in the past.”
Au contraire, say influential Republican Senators, including Lindsey Graham, R-SC, joined by Texas Senator John Cornyn, as they introduced a resolution to require Congressional approval of any such debt limit increase.
"I strongly disagree with those who suggest the president has the unilateral authority to put the American people in even great levels of debt," said Sen Graham in a statement announcing the resolution. "Every time the debt ceiling has been raised it has been through an act of collaboration between the president and Congress. That is not only the right policy decision to make, but the correct political decision as well. We have a President, not a King.
"Our resolution puts the Senate on record that any debt-limit increase, today or in the future, should be passed by the Congress and signed by the president.”
Seasoned observers say it's a matter for the courts.
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