Will Obama invoke the 14th amendment on debt limit?

Will Obama simply declare that the US will borrow as much as it needs to pay its bills, relying on the 14th amendment to justify the move?

The 14th amendment states that the US debt "shall not be questioned." Many interpret that clause as making it impossible for the US to default, that if congress doesn't act to raise the debt ceiling, the executive branch is obligated to do it for them.

Not surprisingly, the GOP takes a dim view of that theory. But it is just one of a series of actions that the Treasury Department is contemplating if the August 2 deadline established by Geithner passes without action.

Reuters:

There has been growing speculation in Washington in recent days that the administration could use the amendment to ignore the congressionally imposed limit on the amount of money the United States can borrow.

"Despite suggestions to the contrary, the 14th Amendment is not a failsafe that would allow the government to avoid defaulting on its obligations," said White House spokeswoman Amy Brundage.

Miller's team has discussed the Government Accountability Office's 1985 assessment that Treasury has the authority to prioritize payments in the event of a default -- an option Treasury officials have been wary of.

The administration's nightmare scenario is that investors panic at the prospect of a default, triggering a crisis that eclipses the 2008 financial meltdown. That could plunge the U.S. economy into another recession, something that could doom Obama's re-election prospects in 2012.

Some conservative Republicans have argued the Treasury can prioritize payments and manage a default. The administration wants to keep lawmakers focused on the August 2 deadline, and even a hint of a "Plan B" could lessen the urgency to strike a deal by then.

Would the administration dare? I think they are more likely to go for the second option rather than using the 14th amendment. But you can bet the government services they shut down if they have to prioritize payments will get the loudest screams from the public. Imagine clearing out Yellowstone and other parks and shutting them down in the middle of your vacation? Whatever will have the biggest political impact, they will refuse to fund first.


Will Obama simply declare that the US will borrow as much as it needs to pay its bills, relying on the 14th amendment to justify the move?

The 14th amendment states that the US debt "shall not be questioned." Many interpret that clause as making it impossible for the US to default, that if congress doesn't act to raise the debt ceiling, the executive branch is obligated to do it for them.

Not surprisingly, the GOP takes a dim view of that theory. But it is just one of a series of actions that the Treasury Department is contemplating if the August 2 deadline established by Geithner passes without action.

Reuters:

There has been growing speculation in Washington in recent days that the administration could use the amendment to ignore the congressionally imposed limit on the amount of money the United States can borrow.

"Despite suggestions to the contrary, the 14th Amendment is not a failsafe that would allow the government to avoid defaulting on its obligations," said White House spokeswoman Amy Brundage.

Miller's team has discussed the Government Accountability Office's 1985 assessment that Treasury has the authority to prioritize payments in the event of a default -- an option Treasury officials have been wary of.

The administration's nightmare scenario is that investors panic at the prospect of a default, triggering a crisis that eclipses the 2008 financial meltdown. That could plunge the U.S. economy into another recession, something that could doom Obama's re-election prospects in 2012.

Some conservative Republicans have argued the Treasury can prioritize payments and manage a default. The administration wants to keep lawmakers focused on the August 2 deadline, and even a hint of a "Plan B" could lessen the urgency to strike a deal by then.

Would the administration dare? I think they are more likely to go for the second option rather than using the 14th amendment. But you can bet the government services they shut down if they have to prioritize payments will get the loudest screams from the public. Imagine clearing out Yellowstone and other parks and shutting them down in the middle of your vacation? Whatever will have the biggest political impact, they will refuse to fund first.


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