14th Amendment Ceiling, One Debt Default, Two-Party Blame  

We’ve had it up to here with the hyper-partisan parrots’ debt ceiling debacle. Can the 14th Amendment keep the dollar the world reserve currency? They, meaning Congress, could agree on waste and redundancy cuts, or raise taxes from people who actually have money, or they could grow the middle class and save money on crime and social services, or they could even selectively spend without having to borrow or raise taxes.

But, no, they want to risk losing reserve currency status for the US dollar instead. This is the Saturday Keynote which wraps up our week’s reporting on invoking the 14th Amendment to prevent a catastrophic default on US Treasuries.

Should the
14th Amendment be invoked to avoid a US debt default?

Why Care?

The last time the Government shut down, it hurt the economy, meaning workers, professionals, small business owners, and the stock market.

And this time, it’s possible we’ll default on US debt, which is about the same thing as a self-inflicted gunshot wound.

This might risk the dollar losing its status as the world’s reserve currency. Perhaps the stupidest thing a country could do to itself.

Should the
14th Amendment be invoked to avoid a US debt default?

The 14th Amendment states, “The validity of the public debt…shall not be questioned.” This clause suggests the President has the power to override the debt ceiling to ensure America pays its bills.

Legal scholars argue the President can invoke the 14th to prevent economic calamity if Congress fails to raise the debt limit. Unilaterally raising the debt ceiling using 14th Amendment powers remains controversial but may be necessary to avert catastrophe.

More responsible budgeting is something all four sides of the table can agree on, but in the meantime, there’s a crisis to handle.

Is there a Debt Crisis?

The US total net worth is $150T. The debt is $33T, but $7T is intergovernmental, so $25T is owed to others.

Of the $25T, about $7T is held by our foreign country trading partners (they have to put the dollars we give them somewhere).

The remaining $18T is held by Americans wealthy enough to buy US treasury bonds and notes.

The average US household has a net worth of $750,000. The average household debt is $100,000. So that’s a $100,000 / $750,000 or 13% debt to net worth.

The US total net worth is $150T. The net US Debt is $25T.  So, that’s $25T/$150T or 17 % debt to net worth. 

Does this sound like an emergency so dire as to risk the full faith and credit of the United States of America?

A household can’t issue their own currency to pay bills.

Let’s bear in mind the US is not like a household, meaning a household can’t print currency.

The US is the monopoly issuer of net financial assets. Net, because banks can also issue currency, but they have to pay it back to the Fed. The US doesn’t have to pay itself back. It’s a book entry. 

You can’t spend a net dollar until the US spends it into existence. When you pay your taxes, the money is destroyed, and a number changes on a balance sheet.

To pay down the debt, the US has to run surpluses. The only problem is US government surpluses cause depressions.

In 1817, 1852, 1867, 1880, 1893, 1920, 1928, 1998-2001 the US government briefly ran rare budget surpluses, which were followed in short order by equally rare major economic crises – the Panics of 1819, 1857, 1873, 1893, and the Depressions of 1920-21 and 1929, and the Great Recession of 2008 (delayed by the sub-prime lending fiasco). The Great Recession was technically a Depression with 15% U-6 unemployment.

Causation or Correlation?

None of the four schools of economics will likely agree on whether the rare surpluses caused the rare depressions, but come on, eight times in a row, really?

Could there have been other factors that forced the surpluses that caused the depressions? Sure, but how come no one can explain that so a precocious 12-year-old can understand it? Occam’s Razor, the simplest solution, is likely the correct solution.

Isn’t insanity doing the same thing over and over again and expecting a different result? 

The Four Schools of Economics

Models don’t need to be perfect. They just need to be useful. The entire field of economics is based on a falsehood, homo economicus, the rational human. We now know that humans are emotional beings who think. 

The Four Schools are Surpluses (save for rainy days), Hayekian (small government and balanced budgets), Keynesian (borrow in bad times and pay back in good times), and Modern Monetary Theory (not all deficits are the same).

Some Hayekians are predicting a depression in the 2030s when the debt service and healthcare costs will become too big.

SPOILER ALERT

You can role-play this week’s puzzle at PolicyKeys.com. This week’s political flap started with our Monday Puzzle Drop article. Tuesday was the Tiebreaker of all the conflicted roles. Wednesday, we caught politically strange bedfellows dancing on the debt ceiling. Thursday, you and your political digital twin tipped back some tall cool reasoning. Friday, think outside the news silo with the BOX SCORE.

So, what’s the 14th Flap?

Here are the pros and cons of the President invoking the 14th Amendment to avert a debt default, as seen through the eight ways of interpreting the Constitution.

  1. Textualism: While the text supports debt obligation authority, it does not explicitly approve overriding the ceiling without Congress.
  2. Original Meaning: Though perhaps intended as a safeguard, the founders likely didn’t envision unilateral executive borrowing power.
  3. Judicial Precedent: Courts have affirmed executive economic stability powers but deferred debt ceiling control to the legislature.
  4. Pragmatism: This prevents harm from default, though the severity required is debated.
  5. Moral Reasoning: Honoring commitments seems ethically correct, but bypassing Congress raises moral questions.
  6. National Identity: Paying debts reflects responsibility, yet undermining democratic norms does not.
  7. Structuralism: This maintains balance in a crisis but tests the balance of power between branches.
  8. Historical Practices: While considered previously, firm precedent for invoking the 14th this way is very limited.

If you want to get out of your news silo, pay attention to which schools of interpretation the Supreme Court justices use, case by case.

Are they retrofitting their rulings to suit their politics, or are they consistent with some mix of these schools?

This is especially interesting for liberty-led suits and justice-based suits.

An AI could rate each judge on their interpretive consistency. Would that be outside-the-silo news?

Since liberal justices tend towards Pragmatism and Moralism, and conservative justices towards Textualism, Originalism, and Structuralism, it’s hard to imagine how invoking the 14th Amendment to avoid a catastrophic debt default would be overruled if appealed. At face value, it looks like four schools of thought in favor against one opposed.

If overruled, perhaps we need to upgrade to a Grand Supreme Court, which is #31 on the US Public Policy Leaderboard (US-PPL).

BOX SCORE

The 14th Amendment to
Protect the Full Faith and Credit of the USA
Nonpartisan Score
Near Consensus
Support

POLI found NEAR CONSENSUS support. Our editors agreed. We predict an 84% ±2 (6 roles) NEAR CONSENSUS of roles in this country to support the 14TH AMENDMENT TO PROTECT THE FULL FAITH AND CREDIT OF THE USA, including a majority of each of the four sides of the political tablemaking this a US Public Policy Leaderboard (US-PPL) worthy idea. 

90% and up Near Unanimous
80% – 89% NEAR CONSENSUS
75% -79% Vast Supermajority
67% – 74% Strong Supermajority
60% – 66% Supermajority
50% – 59% Majority

By
Contrast

SCOTUS’s approval rating is 41%,
the media is 32%, and
Congress is 15%.

Do we expect you to agree with the supermajority on all the rankings? Of course not; you’re human, not a political parrot.

We think you’ll agree with the leaderboard about 3 out of 4 items on average. Why?

The average score of the policies on the PolicyKeys™ US Public Policy Leaderboard (US-PPL) Sweet Sixteen is 76%, with many above 80%Politics 4.0 is already a 2x to 5x better model of US political sentiment and direction than politics as usual.

Conclusion

Congress acts more like a hormone-driven high school than the most powerful body on the planet. They both love their party more than country.

Both parties have had total control over the past 50 years, and yet the middle class has shrunk.

Blaming each other for everything that goes wrong and taking credit for success—is getting really old. Old like we need new behaviors in our elected officials. Where can we agree?

Fly
Higher

Constitutional Interpretation
Study.com

Average Net Worth
US News & World Report

US Median Household Income
St Louis Fed

Average Household Debt
Motley Fool

US Total Net Worth
Reuters

The Rise and Fall of American Growth
Princeton University Press

The Clinton Surplus
FactCheck.org

U6 Unemployment over 15% in 2008
St Louis Fed

The 2030s Great Depression
ITR Economics

Why America Will Remain the World’s Only Superpower
American Enterprise Institute

How much would a debt default damage the US?
Christian Science Monitor

The Validity of the Public Debt Shall Not Be Questioned
Constitution.congress.gov

Methodology

It takes guts to see things from
all four sides of the political table.
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