A once-fringe solution to the Obama administration’s debt limit bind has filtered all the way up to the president’s inner circle. Treasury Secretary Tim Geithner suggested late-last month that section Four of the 14th amendment may authorize him to just ignore the debt limit entirely. Geithner told an audience in May:
I think there are some people who are pretending not to understand it, who think there’s leverage for them in threatening a default. I don’t understand it as a negotiating position. … can I read you the 14th amendment? … ‘The validity of the public debt of the United States, authorized by law, including debts incurred for the payments of pension and bounties for services in suppressing insurrection or rebellion’ — this is the important thing — ‘shall not be questioned.’ So as a negotiating strategy you say: ‘If you don’t do things my way, I’m going to force the United States to default–not pay the legacy of bills accumulated by my predecessors in Congress.’ It’s not a credible negotiating strategy, and it’s not going to happen.
Geithner has made it clear in earlier letters to the Senate that he considers all federal government obligations (Social Security payments, ethanol subsidy payments, interest payments on Treasury securities, etc.) completely equal. According to Geithner’s logic, a failure to pay California millions of dollars for their high-speed rail project would be the same as missing interest payments to bond holders. So, even though the Treasury Department could easily pay the $29 billion in August interest payments with the estimated $172.4 billion it will receive in revenue, thus avoiding default on the public debt, Geithner appears to be arguing the 14th amendment allows him to pay all of the federal government’s bills regardless of where Congress set the debt limit.
Is this the view of the White House? Could Obama order Geithner to ignore the debt limit and sell Treasury bonds? Obama ducked a direct question on this point Wednesday from NBC’s Chuck Todd. Someone should ask it again.
Around the Bigs
The Washington Examiner, GOP pushes back at Obama over debt talks: Minority Leader Mitch McConnell, R-Ky., took to the Senate floor and invited Obama to speak with Senate Republicans about the debt limit yesterday. But with Obama attending campaign fundraisers out of town, White House spokesman Jay Carney had to decline the offer: “That’s not a conversation worth having.” On the Democratic side of the aisle, Majority Leader Harry Reid, D-Nev., canceled the Senate’s week long July 4th recess.
Bloomberg, Geithner to Consider Leaving After Debt Debate: Treasury Secretary Timothy Geithner has told the White House he intends to step down after an agreement is reached with Congress to raise the debt limit. According to sources, Geithner is tired of commuting from New York and wants to spend more time with his family. He also told former-President Bill Clinton: “I’ve never had a real job. I’ve only worked in public service.”
The New York Times, White House Sees Date for Budget Deal or Bust: The White House is telling other Democrats that a debt limit deal must be struck by July 22nd or the U.S. will “risk” defaulting on the national debt. The earlier date is due to the need to get any deal through both houses of Congress before Geithner’s August 2nd deadline. The Times also reports that Obama has agreed to $200 billion in Medicare and Medicaid cuts, but is insisting that Republicans agree to $130 billion in tax hikes in exchange.
The Wall Street Journal, President Gets Flak for Jet-Tax Idea: The nation’s Jet manufacturers and their employees did not appreciate being singled out six times by Obama as a source of sacrifice in his debt limit press conference Wednesday. “While such talk may appear to some as good politics, the reality is that it hurts one of the leading manufacturing and exporting industries in the United States,” a joint letter by the General Aviation Manufacturers Association and International Association of Machinists and Aerospace Workers to Obama reads. Economists also point out that punitive taxes on luxury-goods in the 1990s killed thousands of yacht, personal aircraft, and luxury automobile jobs.
The Hill, Judge denies Boeing motion to dismiss NLRB lawsuit: An administrative law judge denied Boeing’s motion to dismiss the National Labor Relations Board’s suit against the airplane manufacturer. Instead of making planes and creating jobs, Boeing will now need to waste countless time and money defending the case throughout the NLRB’s administrative process.
Minneapolis Star Tribune, Minnesota State Government Begins Historic Shutdown: Unable to win Republican votes for tax hikes, Minnesota Gov. Mark Dayton said, “This is a night of deep sorrow for me,” as he announced state government would have to shutdown since no agreement on a budget could be reached.
The Orange County Register, Amazon ends deal with 25,000 California websites: Amazon informed 25,000 small businesses in California that they could no longer affiliate with the web retailing giant because of California Gov. Jerry Brown’s new law taxing internet sales. The state’s Board of Equalization says the tax will raise $200 million a year, but critics point out revenues will fall far short of that total as companies like Amazon stop doing business with retailers in the state.
The Washington Examiner, Union curbs rescue a Wisconsin school district: Thanks to Republican Gov. Scott Walker’s government-union busting budget bill, the Kaukauna School District of Wisconsin has gone from a $400,000 deficit to a $1.5 million surplus.
The Wall Street Journal, Design Flaw Fueled Nuclear Disaster: Senior engineers at the now destroyed Fukushima nuclear power plant knew for years the decades-old facility had a dangerous design flaw, but Tokyo Electric Power Co. refused to fix the problem, setting the stage for the disastrous outcome after this year’s earthquake and tsunami hit.
Perry: In a sure sign that he is leaning toward entering the race, Tex. Gov. Rick Perry, urged U.S. Attorney General Eric Holder to take actionhttp://nrinstitute.org/lmotw/wp-admin/post-new.php against any Americans who plan to take part in the latest pro-Palestinian flotilla headed for Gaza to break an Israeli naval blockade.
McCotter: Sources tell USA Today that Rep. Thaddeus McCotter, R-Mich., will announce a run for the White House on July 2nd from his home state of Michigan. It is unclear what need or constituency McCotter believes his candidacy will address.
Romney: Campaign aides tell The Examiner that former-Massachusetts Gov. Mitt Romney will will report raising between $15 million and $20 million in the second quarter of this year which ended at midnight last night. Romney’s $15 million is expected to far outpace any of his GOP rivals but is far behind the predicted $60 million Obama will raise this quarter.
Romney continued to act like a front-runner yesterday, attacking Obama from a non-early primary state. Speaking from a now-closed factory in Allentown, Pa., Romney told reporters, “I didn’t pick this spot; he did,” Romney said, in a reference to a 2009 Obama speech at the same location. “This is the spot he picked to symbolize the success of his stimulus, and my eyes tell me it ain’t working.”
Pawlenty: In yet another blow to his sputtering campaign, former-Minnesota Gov. Tim Pawlenty will report raising less than $5 million this quarter. Worse, not all of that money will be available for the primary since parts of those funds were earmarked for general election purposes. Even if Pawlenty reached $5 million, and all of it was primary funds, it would still be far less than any first-tier Republican candidate raised in 2008.
The Heritage Foundation responded to White House attacks on its reporting yesterday. Obama aide Dan Pfeiffer attacked Heritage for its claim that Obama’s stimulus “created” the jet tax loophole. Heritage VP Mike Gonzalez responds: “So, yes, obviously, if we could write it again, we would say “re-authorized” not “created.” … President Obama did create the Stimulus, which did include a tax break for the purchase of private jets. That failed bill only received three Republican congressional votes.”
RedState writes up a CNBC report finding that the best workforces are in right-to-work sates: “When it comes to America’s Top States for Business 2011, when it comes to a quality workforce, 18 out of the top 20 states are Right-to-Work states. Moreover, all 22 Right-to-Work states are in the top 25 states for having the best workforces.”
At The Volokh Conspiracy, Georgetown University Law Center professor Randy Barnett identifies Eight Things to Know About Yesterday’s Sixth Circuit Decision, including: “Yesterday’s decision affirmed 2–0 the unprecedented nature of this power.”
Under the header, Section 4 Of The 14th Amendment Was Designed To Stop Boehner, The New Republic’s Jonathan Chait writes: “it’s in the 14th Amendment to guard against exactly what Congressional Republicans are doing right now. … It’s certainly risky to take a flyer in the middle of a debt crisis. But if we do reach h-hour, we’re probably better off if the Treasury simply announces it’s going to continue to pay the bills and dares Republicans to take them to court than repudiating the debt, right?”
The Huffington Post notes that at a May 25th Politico Playbook breakfast Treasury Secretary Tim Geithner whipped out his own copy of the 14th amendment and read section Four out loud and added: “I think there are some people who are pretending not to understand it, who think there’s leverage for them in threatening a default. I don’t understand it as a negotiating position. … So as a negotiating strategy you say: ‘If you don’t do things my way, I’m going to force the United States to default–not pay the legacy of bills accumulated by my predecessors in Congress.’ It’s not a credible negotiating strategy, and it’s not going to happen.” Was this a threat by Geithner to ignore the debt ceiling and point to the 14th amendment as justification?
Yale Law School Professor of Constitutional Law Jack Balkin has a lengthy post at Balkinization providing the history of the adoption of section Four of the Fourteenth Amendment. He does not claim to attempt whether or not the legislative history supports liberal claims that Obama can just ignore the debt ceiling. But reading the post all the way through, it is clear that the authors of the 14th amendment in no way intended for the amendment to give any president that power.
Firedoglake’s Jon Walker cites reports that the White House is considering changes to how the CPI is used to calculate Social Security benefits and warns, Social Security Benefits Cuts Are in the Mix in Debt Ceiling Negotiations. Walker writes: “Congress is in full-blown austerity mode right now and any deal that comes out of these negotiations is likely going to be bad news for regular people.”