Three Myths about Government Default
January 22, 2013
In order for clarity to emerge on the debt ceiling debate, three false claims must be addressed, say David Rivkin, Jr., and Lee Casey, both former members of the Reagan and Bush senior administrations.
Myth one: If Congress refuses to raise the debt ceiling limit, it will trigger a default.
- Section 4 of the 14th Amendment states that Congress cannot question the validity of public debt.
- Originally intended to guarantee debts incurred by the federal government after the Civil War, the Supreme Court affirmed Section 4's modern meaning in 1935.
- Even if the debt ceiling isn't raised, the government must pay its creditors.
- With more than $200 billion in tax revenue per month, the government can easily cover its bills and should be able to stave off any negative consequences for our credit rating.
Myth two: The debt ceiling must be raised to cover spending on entitlement programs such as Medicare and Social Security.
- Medicare and Social Security are not considered obligated debts under the 14th Amendment.
- Indeed, the wording of Section 4 was purposefully crafted to include the word "debts" but not "obligations."
- The distinction between the two was recognized by the Supreme Court in Flemming v. Nestor (1960) which ruled that Congress had the ability to modify Social Security benefits.
- Thus, Congress has no legal or constitutional responsibility to cover the bill for entitlements.
Myth three: The president has the power to unilaterally raise the debt ceiling with powers granted to him by Section 4 of the 14th Amendment.
- Congress, not the president, is vested with the authority to raise taxes, borrow money and direct expenses.
- Since the debt ceiling is not mentioned in the Constitution, nor is the president's authority to raise it, only Congress could permit the president to raise the debt ceiling on his own.
With these three facts in mind, Congress failing to raise the debt ceiling would trigger major spending cuts so the government could cover its bills. Dispelling these myths is important if the American public is to get behind the necessary reductions in spending that President Obama opposes.
Source: David Rivkin, Jr., and Lee Casey, "The Myth of Government Default," Wall Street Journal, January 14, 2013.
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