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Obama’s Fall-Back Position on a Default

Written by Gary North on October 7, 2013

The United States Constitution is clear: “All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.” (Article I, Section 7)

If the Republicans decide not to submit a budget, the government will shut down. That is what we are being told. But is this correct?

If the Republicans do not submit a budget that the Senate and the President sign into law, the Treasury Department will run out of ways to cook the books this month. It will have to stop paying interest on the federal debt. That will harm the “full faith and credit of the United States,” which is the traditional mantra of those who favor unlimited debt for the federal government. That would increase risk for debt-holders. The government’s credit rating would fall. But is this correct?

Let us assume that the biggest bankers decide that a cessation of debt payments would be pending.  The banking industry has remained silent on this so far. Here is a huge story, we are told, but we do not see warnings being issued by the American Bankers Association.

What if, on October 17, the day the Treasury runs out of games to lock in the debt of the government at $16.7 trillion, the House still does not submit a budget. The Treasury supposedly will not be able to borrow any more money. Legally, the government will be unable to fund whatever the borrowed money would have been used for.

For a while, the President will decry all this. He will blame the Republicans for not doing what he wants them to do.

The two sides will assess political damage. But the government will not be able to pay all of its bills. Increases in the federal deficit will end. We will get a balanced budget.

What if the Republicans do not capitulate before the government’s inability to borrow forces budget cuts in the Defense Department and discretionary spending? Is the solvency of the government really at stake?

No. Because Obama can issue an executive order that orders the Treasury to borrow.

Why not? The President issues lots of these orders. Why not another one?

Would he be impeached by the House? Probably not. If he is impeached in a long trial, will the Senate convict? No.

Who can tell the President to rescind such an order? Not Congress. The Senate will not issue such an order to the President.

This country has a Constitution. But it is interpreted by the President. He decides what to enforce, and how to enforce it. The Supreme Court decides cases. But would it decide in favor of the House? This is not clear. Besides, it could decide not to hear the case.

The President can play chicken with the House. The furloughs will stand.

He can cut defense spending to keep the government afloat.

Or he can bite the bullet in the name of government solvency and sign an executive order authorizing the Treasury to borrow. Who is to say he can’t? Boehner?

It is all politics. The Constitution is honored when it is convenient. It is ignored when politicians decide to ignore it. When a President decides to go to war without a declaration of war, he does. Obama threatened this with Syria. Putin outfoxed him with the chemical weapons ploy, but that was a matter of politics, not the Constitution.

We may get to see the credit ratings agencies downgrade federal debt. But as for the government shutting down completely, the threat is not credible.

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33 thoughts on “Obama’s Fall-Back Position on a Default

  1. Except for the part where the president has issued an executive order that he is in full charge of the nation if we go into default?

  2. Ovomit has a "cold soul". Giving the instruction, "Make it hurt as much as possible" in referencing the citizenship shows just how warped his character is. We have a very sick narcissistic Marxist in the White House.

    Unfortunately, there are some who will follow his orders without realizing that they are crushing their own freedom. However, Ovomit may find that he is beating a hornet's nest with a stick and he could be stung to the point of death. Many Americans are not going to just sit back and let a dictatorship form and abolish all freedom. We've lost a tremendous amount of freedom already to bureaucrat rules and regulations promulgated by individuals whom we did not vote into office.

    Lock and load, folks, it could be about to get really nasty.

  3. LOL. Typical meathead. Can't think for himself.

    "Lock and load, folks." Right, because armed rebellion is just around the corner!

    Pfff.

  4. Gary North, ever the Tea Party Koch-whore shill.

  5. Section 8 of the US Constitution: "The Congress shall have the power…. to borrow money on the credit of the United States". Not the President. Maybe you should read the Constitution before publishing.

  6. old_salty_dawg says:

    The House did it's job and the Senate and Obammy in their DESTROY America mid set did not. They want to DESTROY America and this shut down to get Obammycare funded is just another step in the plan. Obammy wants to DESTROY American healthcare since it is the GREATEST in the World and Obammy hates that. Obammy will do what he wants so long as the Senate backs him and they will because they want what he wants America DEAD.

  7. Gloria Wedemeyer says:

    I also don't understand why only the senate gets to vote on appointees. Why not the House. So if all money has to come from the house first, then they must also follow the constitution on this.

  8. Treasury collects approximately each month 20 times in taxes greater than is needed to pay monthly interest on the debt. Default is absolutely impossible unless ordered by the President (which not even Obama would dare to do). In the event US bonds mature in a given month, treasury issues new ones to cover. This is a zero balance pair of transactions that does not increase the total debt and does not exceed borrowing debt limits. Obama and Jack Lew are engaging in false arguments to scare the public.

  9. the folks that like this muslim lover are either waiting or currently recieving from the gvt. or they're so over propagnadized that they belive everything they hear or see on the msm. anyone thinking that either of these two parties has your best interest foremeost in their political game playing is either or drugs or should be. Get over it people the politicians are running you – we the people no longer run this country.

  10. Devasahayam says:

    "Default is absolutely impossible unless ordered by the President (which not even Obama would dare to do)" — problems with that line of reasoning:
    (1) in 1978, there actually WAS a default (we'll take it that it was ordered by the then-POTUS, Dhimmi Carter — who was several magnitude-orders less-bad as POTUS than bh0)
    (2) Remember that Bill Ayers' protege (bh0) has no more patriotism for the USA than his mentor — and was (s)elected for the nation's destruction

  11. Bravo, bravo, your complete inability to answer North's argument has led to your most laughably silly accusation yet. And you kept yourself concise this time instead of rambling, well done.

  12. Did you miss the part of the article that mentions the politicians ignore the Constitution when they want to? That is why Obama can issue an executive order to borrow money if he feels like it. No one will stop him.

  13. This Administration has abused power a number of times, ignoring the Constitution, so why would O and his ilk not continue to abuse power, the Liberal media supports him all the way. The media will do anything, lie, distort and even sacrifice their journalistic integrity to shield O from scandals and advance his radical agenda.

  14. Obama has learned a lesson from Bill Clinton and George W. Bush. That lesson is that the GOP will not instigate a formal investigation of a former president, regardless of how badly he dishonored his oath of office. Obama knows that, like Clinton, he may be impeached in the House, but the Democrat Senate will not convict him and it will continue to be business as usual. He also knows that even if the next president is a Republican and both houses are in GOP hands, they won't investigate a former president.

    Certainly, a formal investigation of Clinton's tenure would have revealed massive misconduct. But Bush wouldn't do that, because that would mean that after he left office, he would be open for such an investigation, which he knew would certainly find massive misconduct, too. Similarly, although Obama blames Bush for everything that he himself has screwed up, he won't investigate Bush, because he knows that would open him up for such an investigation, when he leaves office. It's a tit for tat exchange that began with Bill Clinton. Each president wants more power, so he builds on the illegal acts of former presidents. But beginning with Clinton, those power grabs began getting larger and larger. It's no wonder that neither party will investigate a former president. They know that to do so would expose at least one of their own to similar scrutiny.

    That's what needs to change. Clinton, Bush, and Obama all violated their oaths of office. Many people, including me, believe that Clinton violated presidential limits under the Constitution. But it's clear that both Bush and Obama violated presidential limits under the Constitution. Because Obama knows this, he believes himself to be bulletproof, once he leaves office, regardless of how much he violates constitutional limits on his authority. If the GOP wants to stop Obama, the House needs to begin formal investigation into the tenures of both Bush and Clinton. That will send a chill down Obama's back that will make him think twice about what he can get away with, especially if indictments are handed down against both of those former presidents.

    Our government is no longer led as a constitutional republic, with three co-equal branches. We now have an imperial presidency. The only way to keep us from going further down that road to complete destruction of the Constitution, is to send a message to Obama and future imperial presidents, that while you may be able to use executive privilege to block an investigation while you are in office, if your transgressions are bad enough, you may well be brought to trial for them after you leave office.

  15. Texas Chris says:

    Who's not thinking for himself?

  16. Texas Chris says:

    And yet, here you are, on his site.

  17. Texas Chris says:

    For a narcissist, the threat of impeachment (and subsequent damage to his legacy) may be enough to control him.

    Or it may send him over the edge into despotism…

  18. And also Gary mentioned that in this case, Obama would be subject to impeachment, which those who can bring the charges probably won't. It's been covered. Maybe you should read the article before replying.

  19. Excellent analysis, John. Perhaps the way out is for private citizens to take matters into their own hands and bring charges. I don't know how the money/manpower could be raised in that case (the government's firepower in terms of lawyers and tax money is formidable) but perhaps it could be done.

  20. Sorry, David–I meant the foregoing to be in reply to feryl, not you. That wasn't clear.

  21. 'Default" is a myth. Government revenue is approx. $200 billion per month, way more than enough to meet interest, social security payments, and other obligations. The Reptilians just need to hang tough and put the onus on the Demogogues.

  22. You obviously have no idea who Gary North is, because he is actually opposed to the Koch brothers' faux libertarianism…
    https://mises.org/daily/6026/

    ex:
    The Koch brothers' Cato think-tank "has served as a cheerleader inside the Washington Beltway for terrible things that Republican presidents have done to extend the power of the federal government."

  23. Jeanne Stotler says:

    What is Unconstitutional, is Reid not bringing bills to the floor for a vote, he's scared his own party will vote for these and have enough votes to override a presidential veto.

  24. Facts please.

  25. meathead co-patriot says:

    u might be a "meathead" but u've got it EXACTLY right in a very simple nutshell. i live in dc, and not that far from ovomit and i am legally loaded. maybe i should go lock.

  26. Stuart Shepherd says:

    Shane, ever the LGPT mascot.

  27. the reason for this is simple. The Senate gets to vote on appointees because originally senators were not elected by the people. Since this was originally a Republic they were appointed by the governor and ratified by their own state legislatures. in this way senators were the states representatives to the federal government. is the only change worse then the unratified amendment established the IRS

  28. Article 4 of the 14th Amendment requires that payment of the national debt shall trump all other payments issuing under (inferior) statutory law (military pay, salaries for Congress-critters, etc.), thus making default impossible if the Treasury has any money at all in the till. And it has LOTS.

    Since the Social Security "trust fund" is a tin box with only IOU's (special US bonds) inside, those payments may be regarded as part of the "national debt". Or not, depending on which gang of politicians gets the upper hand.

  29. polmutant says:

    that is because there are no peoples only sheoples.

  30. Should the Obamanator decide he is high above the Constitution & furthers his power through executive fiat, all true Americans need to decide what non-violent steps of civil disobedience we will take to protest his usurpation of power. Keep in mind the elderly and disabled American Vets that disobeyed at the WWII Memorial. Remember all of the visitors at the closed national parks that ignored, cut down, moved or ran over the barricades to our parks. What will you do to protest?

  31. When there's work to be done, the president runs away and plays golf. And when the crisis is over, he takes another vacation. President Obama, every time you open your mouth to the public somebody gets screwed or worse. Why don't you sit down, shut up, and be part of the solution instead of being the problem. Refuse to negotiate? That makes you totally responsible for the damage. Causing pain to American Citizens is not your right or role. The world is laughing at you and we are suffering under your boot. So get off your lazy . . . and fix the problems this nation has. Don't create them or make them worse.

  32. Another gross violation of the Constitution is that Obamacare did NOT originate in the House, as all spending bills must. When are the Republicans hold him to account for this?

  33. You are here: Govern Wisely » Patient Protection and Affordable Care Act
    Table of Contents

    Legislative History
    Administrative History
    Judicial History

    Patient Protection and Affordable Care Act

    The Patient Protection and Affordable Care Act (PPACA) is revenue-raising legislation which purports to improve health care throughout the sovereign states of United States of America. Immediately after enactment of the PPACA, companion revenue-raising legislation known as the Health Care and Education Reconciliation Act of 2010 was enacted and modified the PPACA.

    Legislative History

    Public Law 111-148 (Pub. L. 111-148) is the Patient Protection and Affordable Care Act (PPACA). The PPACA began its legislative life on 17-Sep-2009 when H.R. 3590, the “Service Members Home Ownership Tax Act of 2009,” was introduced in the House of Representatives by Rep. Charles B. Rangel, a member of the Democratic Party from the State of New York. The House passed H.R. 3590 on 8-Oct-2009 and transmitted the bill to the Senate, which, through traditional Senate amendment processes, modified the title of the bill and replaced virtually all of its original text. The Senate passed H.R. 3590 on 24-Dec-2009, with all sixty (60) members of the Democratic Party voting in favor of passage and all forty (40) members of the Republican Party voting against passage. Speaker of the House Nancy Pelosi, a member of the Democratic Party, held the bill for three months while attempting to garner sufficient votes for passage. On Sunday, 21-Mar-2010, the House passed H.R. 3590, with 219 members of the Democratic Party voting in favor of passage and a bi-partisan group of 212 elected representatives voting against passage. The enrolled edition of H.R. 3590, which was signed by President Obama on 23-Mar-2010, is archived.

    Public Law 111-152 (Pub. L. 111-152) is the Health Care and Education Reconciliation Act of 2010 (HCERA). The HCERA began its legislative life of 17-Mar-2010 when H.R. 4872 was introduced in the House of Representatives by Rep. John M. Spratt, Jr., a member of the Democratic Party from the State of South Carolina. The House passed H.R. 4872 on 21-Mar-2010 – the same day on which the House passed the Senate-amended version of H.R. 3590 – with 220 members of the Democratic Party voting in favor of passage and a bi-partisan group of 212 elected representatives voting against passage. On 25-Mar-2010, the Senate passed an amended version of H.R. 4872, with 56 members of the Democratic Party voting in favor of passage and a bi-partisan group of 43 elected representatives voting against passage. The amended bill was then returned to the House, where it passed with 220 Democratic Party members voting in favor and a bi-partisan group of 207 voting in opposition. The enrolled edition of H.R. 4872, which was signed by President Obama on 30-Mar-2010, is archived.

    Okay, WiseGuy! Identify the part(s) of the Patient Protection and Affordable Care Tax Act (commonly known as "Obamacare") addressing Home Ownership? What do you mean "Nothing Applies"? Should an "ORIGINAL STAFF ECONOMIST" be selective about where Article I, Section 7 is supreme?. Amendments 9 and 10 clarify how the authority of the United States relates to the authority of the several states and the People. Article I, Section 7 prohibits the House of Representatives amending any revenue-raising legislation sent by the Senate that did not originate in the House. Present-day lawmakers may be stupid, but the Founders (whose 'Lives, Fortunes and Sacred Honor' were ever at stake) were anything but stupid. 'Printer's Numbers' do not convey legitimacy. If it applies to a budget battle being fought over Obamacare, what exempts Obamacare originated in the Senate. The bill the House sent to the Senate was all about first-home ownership for veterans, designed to jump-start a nearly-idle homebuilding industry. Article I, Section 7 prohibits the "traditional Senate amendment processes" cited above by 'Govern Wisely', a non-partisan think-tank.. In a challenge that did not cite Article I, Section 7,
    HR 3590 was affirmed constitutional by a 5-4 Supreme Court opinion stating "…it is ultimately Congress' Duty to Lay and Collect Taxes…"

    No institution (not public, private, ThinkTank nor Supreme Court) is immune from our 50-year-old nationwde dumb-down. Sounds crazy? The Scholastic Aptitude Test measures student ability to reason effectively, not intelligence nor knowledge. Administered nationwide to nearly all high school seniors since the early-1950's, the scores have fallen every year since 1963. Don't see that on television or in the newspaper? What makes you believe they are your friends?