In spite of opposition by 72 percent of the American public, Republican members of the House of Representatives have driven the government, and possibly the economy, over the shutdown cliff. More ominous is their threat not to agree to an increase in the national debt ceiling in two weeks, an unprecedented move that would put the United States — until now viewed by the world as the ultimate safe haven — into default. Such a default, even if resolved, would not only complicate the ability to finance the U.S. government and increase its borrowing costs but would also speed up a shift away from the dollar as the primary reserve currency and the United States as a place to invest. In short, it would represent an epochal shift in the status of the United States in the world.
The U.S. Treasury estimates that it will not have sufficient funds to pay all of the nation's bills after Oct. 17 unless Congress votes to increase the statutory limit on borrowing. Failing to gain traction in their drive to delay or de-fund the Affordable Care Act by forcing a government shutdown, hard-liners in the House GOP are now eyeing the deadline for raising the debt limit to seek even more concessions than they could never otherwise achieve. House Speaker John Boehner has reportedly said that he will do what is necessary to avoid a default, but the events of the last week cast real doubt on his ability — or willingness — to stand up to the far right wing of his caucus.
Congress has the power of the purse and the power to tax under Article 1, Section 8 of the Constitution. If Congress authorizes too much spending or permits inadequate revenue generation, it hardly makes sense that it can override the results of the exercise of these Constitutional powers by a mere statute, any more than a person who runs up credit cards purchases could try to avoid responsibility for debts by telling the credit card company that the amount exceeded some artificial total amount of debt that he has vowed not to exceed. Alan Greenspan once said in an interview: "Why do we have a debt limit in the first place? We appropriate funds, we have tax law, and one reasonably adept at arithmetic can calculate what the debt change is going to be."
The Republican mendacity on this issue is almost beyond belief. In 2001 the Republicans took control of the White House and both houses of Congress. At that time the U.S. budget was in surplus and the entire national debt was projected to be paid off. The Republicans proceeded to run eight straight deficits — gutting revenue collection while increasing spending — on the way to generating the first trillion-dollar budget deficit under President George W. Bush and leading the economy into the worst financial crisis since the Great Depression — all factors with which the U.S. economy is still contending.
Even if Republican presidential nominee Mitt Romney had been elected and the budget authored by his running mate, Rep. Paul Ryan, had been in effect, we would still be facing a debt ceiling crisis. The ultimate hypocrisy was contributed by the conservative Heritage Foundation, which, in spite of being an originator in the 1990s of the idea that became the Affordable Care Act, was a key instigator of this week's shutdown over the GOP's insistence that Obamacare be delayed or de-funded.
Worse yet, as Maryland Democratic Rep. Chris Van Hollen has pointed out, that same Ryan budget included savings from the Affordable Care Act in its baseline assumptions as well as changes to Medicare very similar to those included in the act. More galling is the fact that of the 31 states that are net takers of federal spending (that is, they receive more in federal government expenditures than they contribute in tax revenues), nearly two-thirds voted Republican in at least two of the last three presidential elections. Of the states that are net contributors, nearly three quarters voted Democratic during that time. Yet none of the red state members of the House are proposing that their states give up this federal government largesse and become net budget neutral before placing the nation in default.
The bottom line is simple. The fiscal situation of the United States is the result of spending and revenue bills passed by Congress. Defaulting on the obligations of the United States would not only be an incredibly stupid self-inflicted wound, it is likely unconstitutional under Section 4 of the Fourteenth Amendment. As the leader of the Western world, as the custodian of our economy and as required by his oath of office, this president, as should any president, must act to preserve and protect those Constitutional obligations. He has no choice.