10.09.2013 23

The deadbeat president


By Robert Romano

“I say, imagine in your private life, if you decided that I’m not going to pay my mortgage for a month or two — first of all you’re not saving money by not paying your mortgage. You’re just a deadbeat.”

That was Barack Obama describing the plight of delinquent mortgage borrowers, comparing them to members of Congress who dare to question whether the nation can continue to afford to borrow around $1 trillion a year via the ever-increasing debt ceiling.

But what about Obama? If the $16.669 trillion debt ceiling is not raised by Congress, would he default on the nation’s debt?

Is he the deadbeat president?

That’s the question everyone should really be asking as the nation fast approaches the Oct. 17 supposed deadline for Congress to increase debt limit. After that, according to Treasury officials, the nation will default on its obligations to creditors.

But is a default really necessary? Wouldn’t the Treasury just prioritize interest payments to creditors out of the more-than-ample revenue we take in and refinance existing debt up to the statutory limit?

More than enough tax revenue to pay interest owed on the debt

After all, gross interest on the debt owed to our creditors and the Social Security and Medicare trust funds will only total $417.9 billion in 2014, while revenue is projected to total $3 trillion, according to the Office of Management and Budget.

That averages to about $34.8 billion owed in interest every single month. Taking a peak at Treasury’s monthly statement, the lowest revenue ever gets is usually in February, when it was most recently $122.8 billion. It peaked in April at $406.7 billion. Either way, there is always more than enough taxes collected each month to pay interest on the debt. There just wouldn’t be enough revenue for everything else.

Granted, revenue collected versus interest owed on a daily basis would vary dramatically — and certainly there might even be days where interest owed exceeded revenue on hand. But, the Treasury also knows what is coming due and when it is coming due.

Therefore, creating an escrow-like account in advance of reaching the debt ceiling to deposit surplus revenues for the purposes of paying interest owed when revenues take a dip would more than guarantee payments would be made on time and in full. Whether Treasury Secretary Jack Lew has done that or not since the debt limit was initially reached in May is another question entirely.

The primary point here is that even if the debt ceiling is reached, a default is first and foremost unnecessary. There’s more than enough tax revenue to pay interest on the debt, and existing debt could be refinanced.

Others believe that should Congress fail to increase the debt ceiling, Barack Obama will falsely invoke the 14th Amendment to the Constitution as somehow authorizing a unilateral, arbitrary increase in the borrowing limit.

This piece shall take the contrary view that the Obama administration will not pursue either of these two options. That Obama would actually default — and may even have reason to believe it would be politically advantageous for him to do so.

But wouldn’t a default be… bad?

First, before making that case, on the surface it would appear to be common sense that Obama wouldn’t be foolish even if the debt ceiling were to be hit. That he would either prioritize payments or go the 14th Amendment route to hike the debt limit. After all, a default on U.S. debt would in fact be catastrophic to not only our economy, but the world’s economy.

It would be unthinkable.

The principal reason for that is because the U.S. is the caretaker of the world’s reserve currency, the dollar. In addition, some $5.6 trillion of federal government debt is held overseas. Plus, under Basel III capital requirements, sovereign debt is considered a “risk-free” asset — meaning financial institutions do not have to keep any capital on hand to protect against a default.

If, suddenly, the U.S. could not make payments on the $16.7 trillion debt on time and in full, a vicious cycle would set in. Interest rates would go to the moon, the value of our bonds would collapse, as would the dollar. A run on dollar-denominated assets would ensue rapidly, including stocks, and the ensuing collapse would make 2008 look like little more than a sneeze.

The end result could be a hyperinflationary, Soviet-like collapse — for those who consider the alternative, a deflationary collapse, consider that high interest rates almost always coincide with high inflation — with commodities prices becoming unaffordably high and the American engine of economic growth grinding to a halt.


This would ripple throughout the world, maybe even leading to other monetary collapses, particularly in advanced economies.

A U.S. default would be perhaps the single most cataclysmic economic event since the Great Depression.

Would Obama let the default happen?

Now, if Congress did not agree to increase the debt ceiling, Obama wouldn’t let all that happen, would he? He would just raise it himself, or else prioritize payments to our creditors, right?

Obama’s own Treasury Department has issued a report making similar predictions in the event of a default. So why in the world would Obama precipitate one by refusing to pay interest on the debt when there’s enough revenue to do so?

Let’s consider the arguments against the administration actually pursuing both of the nuclear options once the debt limit was truly hit, either 1) refinancing existing debt up to the limit and paying interest owed to creditors and government trust funds out of revenue, or 2) falsely invoking the 14th Amendment to unconstitutionally raise the government’s borrowing authority.

The most important factor to consider is that the administration has repeatedly, explicitly stated that it will do neither of the above.

What about prioritizing payments?

The White House’s argument against prioritizing debt payments to creditors is that the government legally has no authority to do so, according to a recent Inspector General’s report on the Aug. 2011 debt ceiling debacle.

“While Congress enacted these expenditures, it did not prioritize them, nor did it direct the President or the Treasury to pay some expenses and not pay others,” the report states. “As a result, Treasury officials determined that there is no fair or sensible way to pick and choose among the many bills that come due every day. Furthermore, because Congress has never provided guidance to the contrary, Treasury’s systems are designed to make each payment in the order it comes due.”

So, the administration’s plan if and when the debt ceiling is reached is to fail to distinguish between the need to pay our creditors and building bridges to nowhere. Instead, “organizationally they viewed the option of delaying payments as the least harmful among the options under review,” according to the report. Or in other words, “no payments would be made until they could all be made on a day-by-day basis.”

To be very clear: Treasury here is saying it would fail to make payments on time and in full to creditors, which would most certainly constitute a default. Interest rates would rise rapidly, and credit ratings agencies would downgrade us overnight.

Next, if any more evidence was needed that Obama intends to default should the debt limit be reached, he has explicitly issued a veto threat against the “Full Faith and Credit Act” that would change the law and prioritize that payments be made to our creditors in the event of a ceiling-triggered cash shortfall.

Finally, instead of creating an escrow-like account to stockpile revenue to pay interest in the event the debt ceiling was reached, and paring back expenditures, it appears Jack Lew has engaged in “extraordinary measures” to prevent any slowdown of non-essential payments.

A local savings and loan could have figured out how to use an average $250 billion a month of revenue to pay $34.8 billion average interest owed, and yet it somehow has escaped the Treasury secretary’s attention. He’s apparently too busy raiding the federal retirees’ trust funds as the department did in 2011 to be bothered with actually constructing a plan that would avert a true default.

In other words, come Oct.17, there won’t be any cash reserves. Because the Treasury has already burnt through those, and has no backup plan. So, a default will ensue.

The 14th Amendment?

But what about invoking the 14th Amendment? This is the scenario wherein the Constitution would be interpreted to mean that Obama has the power to do whatever he pleases in order to ensure “The validity of the public debt of the United States, authorized by law … shall not be questioned.”

Never mind that this section of the Amendment was originally set up to ensure that debts incurred during the Civil War would be honored, and also to bar the federal government or any state from assuming the debts of the Confederacy. Or that, if anything, the 14th Amendment would require that principal and interest payments be prioritized and made to our creditors — no matter what.

There are several other problems with this proposition.

For starters, the Constitution empowers Congress, not the President, in Article 1, Section 8 to “borrow money on the credit of the United States.”

Further, Article 1, Section 7 gives the House of Representatives the sole power to originate legislation affecting “the raising of revenue.” And there is no question that adding new debt is new revenue.

To put the icing on the cake, “This administration does not believe that the 14th Amendment gives the president the power to ignore the debt ceiling — period,” White House Press Secretary Jay Carney said on Dec. 6, 2012.

So, there you have it. In order to maximize its leverage on Congress to pass a debt ceiling increase on its terms, the White House has painted itself into a corner, all but guaranteeing a default come Oct. 17.

But why default if it is unnecessary?

One hopes that Obama is bluffing.  But, if we merely take the Obama administration at its word — and I think we should — if Congress fails to raise the debt ceiling by Oct. 17, Obama intends to default on the debt. Even though he doesn’t have to.

Again, it could all be a head fake. Yet, this is an administration known for never letting a good crisis go to waste.

Maybe Obama takes a long, historical view of crippling economic distress — and the likely political outcome thereof. The calculation here is Republicans would get blamed for a default, and Democrats could secure permanent majorities going forward to implement their agenda unimpeded.

Wouldn’t be the first time. After all, both the 1929 and 2008 market crashes ultimately resulted in gargantuan Democratic majorities in both houses of Congress, plus the White House.

But for the Depression and next the Great Recession, there likely would not have been the votes in Congress to pass programs like Social Security, Medicare, and now Obamacare. Bank panics in the early 1900s led directly to the creation of the Federal Reserve a century ago in 1913.

To the best of our knowledge, these were most certainly not deliberate, government-provoked financial crises to enable a power grab. But would Obama threaten or worse instigate an unnecessary default on our debt, crashing the global economy, merely for political gain?

If so, then he is not only a deadbeat, he’s evil.

Robert Romano is the senior editor of Americans for Limited Government.

  • pduffy

    Obama’s argument is more like this: “Unless the banker gives me another credit card to go party on a Caribbean cruise, spend like a drunken sailor and live it up, I will default on my mortgage. Oh, and then I will pay my mortgage with the remaining credit limit on my new credit card”.

  • Daniel Spickard

    I think that if Obama defaults in any way, we the people should remove him and all of his administration from office. We should also file charges against him and everyone of his administration, and seize all assets of Obama. Then we should go after Harry Reid for his terrorist acts against the people of this country.

  • fcsuszka

    How do you plan to go about doing that? It’s one thing to say “we need to” and it’s another to say let’s go when you have the support to do so. As messed up as this country is, I don’t think you’d get the support from the majority. The majority are satisfied with what’s going on the way it is. Why change it. More people than ever are on food stamps. More people than ever are sitting back collecting money for not doing anything and this includes illegals who are slowly chipping away at our nation and economy but the American people are satisfied with that mode of operation. They must be. Obama is still in office, the dead beat lip service elected officials are still in office and the worthless departments are still functioning and giving out grants so the scientific community can research the sex life of the tsetse fly. I mean why not. Give more money to Obama so he can flit off on another vacation to relieve his stress while we the people sit home, eat our peas and try to pay for the expensive electric cars that do nothing except suck up electricity and foster coal burning electric plants that pollute the planet.
    So Daniel. what’s your plan?

  • fcsuszka

    Personally I think Obama is nasty enough to do just that. Default and let the American people flounder like fish out of water. What else can you expect from a narcissist? If Obama doesn’t get his way he shuts down web sites, veterans memorials, some of which were built with private donations and not tax dollars, furlough people and congress still gets paid for acting like a bunch of drips. Yes, Obama is nasty enough to act like the spoiled child that he is and let the country slip further into the abyss. After all, that would hasten a takeover by an invading foreign country and the Muslim uprising in this country will have us all in slavery. Well-More so than now. We in some respects are slaves to the federal government and their asinine ways.

  • yaki534

    Obama has a welfare attitude. The taxpayers owe him everything when he has not earned a dime in his life.

  • chetohimler

    Listen Mr. “Deadbeat”, you don’t know what some people have to do to keep their homes, bills and families surviving. Some of us stretch our money to the limit. And you know what Mr. “Deadbeat”? We make it work with just what we have. And we do not ask for nothing from no one….especially the government. We are truely blessed.

  • don

    California and now Colorado has recalled some of there Politician’s so why can’t wee “RECALL” the President of the United States. Should he not be forced to answer for his crimes against every American Citizen’s.

  • jerome ennis

    The following was posted in 2010 or 11
    when the Obama Regime extended unemployment benefits to 99 weeks, and
    after the 99 weeks run out, many of these same folks who have stopped
    looking for work have gone on all the other welfare programs, and
    millions more have applied for and received Social Security
    Disability Income even though they are no Disabled. The is how the
    Obama Regime has Expanded The Welfare and Deadbeat State. Social
    Security Administration has grown in size and power and to grow, they
    have to Create New Victims to Serve in order to Justify their Growth
    in Size, Employment, Power and Spending. This is true in every
    federal agency, especially since Obama has been POTUS. Their aim is
    to turn the Majority of the Nation Into Deadbeats Dependent on
    Government in order to Control Them and Rule Them. And, the biggest
    and worst deadbeats in the Country are Barack and Mooch-Elle Obama,
    two worthless scoundrels who have never had a real job in their
    lives, and have always mooched off others, and now as POTUS, the
    Obama and his brood have squandered over one billion dollars of Money
    from the U.S. Treasury on their Lavish Lifestyle that has included
    Mooch-Elle’s trip to Spain with 200 of her Cronies from Chicago
    staying in a lavish hotel that rooms cost $2500 per night. And,
    besides the 200 Guests of the Taxpayers, there was Mooches 40
    Personal Aids/Flunkies/Servants, 200 Secret Service Personnel and all
    the costs of operating Air Force 2 and numerous other U.S. Military
    jets, jeeps, armored cars, etc. And, then there was the Obama’s
    recent trip to his Homeland in Africa that cost Tax Payers 100
    million dollars. These folks have no shame, only greed,
    ungratefulness and arrogance. I will be so glad when they spend
    their last day in the White House, and somebody ought to be there to
    watch what these deadbeats try to pack up and steal.

    The Obama regime wants more and more
    welfare deadbeats because deadbeats also get to vote for how much
    money the communists take from those of us who work. That is why
    Obama keeps Spreading and Growing the Welfare state, including
    extending Unemployment Checks all the way into 2012 so that
    Unemployed workers receiving Unemployment Checks will vote for him in
    hopes their Unemployment Checks will continue for ever. They are
    attempting to put as many people out of work as possible, thereby
    creating more people Dependent on Big Daddy Nanny State Government.
    It is not all that complicated what their pans are. Just watch their
    actions. Obama has also created over 200,000 new U.S. government
    jobs, excluding the military, and has added even more government
    agencies. He is consolidating power and creating voting blocs of
    Deadbeats on Welfare or government worker, who are also, for the most
    part, Deadbeats with A Job which is created to do Nothing except
    shuffle paperwork and receive a pay check and tax payer benefits.

  • rivahmitch

    The mulatto Mussolini’s goal has always been to destroy the American economy, middle class, and standard of living. Just remember the Cloward-Pivens goal for the “street-organizer” was to “overwhelm the system”. Once it was inside, that became much easier. It’s desired result will be bloodshed. Those unwilling to kill and die for their rights, freedoms and property will surely and deservedly lose them.

  • marylou

    You are only a slave if you permit yourself to be a slave.
    Stand up and get a backbone….tell the petulant president that you will work to impeach him and get your elected officials and the public to work with you!
    Whining and wringing your hands never got anything accomplished, nor does subjecting yourself to threats of slavery!

  • marylou

    There are many plans already in place…..impeachment proceedings for one! Join the movement…if you are serious!
    Put your money up , work for and support and constitutional candidates. Vote for and support voter ID fraud by demanding Voter ID make noise…the other side does…!

  • Art Hock

    When Websters publish their next dictionary under “pathetic” there will be a picture of Obama and his fat wife.

  • crustyone

    He’s a jacques koff.

  • Sgt. York

    O,Vomit is a Muslim wearing an American mask.If we don’t stop him and his Army of Liberal Communists we are or will be sinking fast

  • rockyvnvmc

    Barry Soetoro aka Barack Obama aka Harrison Bounel (or Whatever his Real Name is) has been utilizing the ‘Cloward-Pivens Strategy’ (Google it) to bring down the American system and to Install a Socialist one in it’s place.
    Wake Up America !

  • Rubygirl

    It’s simply called a Cash Flow Plan…any good business has one!!! Especially, where “income” fluctuates monthly or seasonally. I’ve done one, literally by hand, w/o computer for a mfg company so you would think with all the computers and “smart” analysts/accountants they could come up with one!!

    Methinks obama and friends like to cry “WOLF” too much!!

  • Rubygirl

    I don’t think we are going to reach the “freeloaders” until it hits them squarely in the EBT cards. Unfortunately, in the meantime, we the working class will pay dearly. And keep paying, even when the $$ runs out. I believe obama will continue some way to “pay” the welfare class until they are no longer useful to his regime.

    I keep thinking that one man could NOT do all he is doing. There has to be MANY “supporters” in prominent positions to implement his plans. How did they get there? Not all were appointed in the last 5 years. If we cut off the implementers, he will have no one to carry out his dirty deeds.

    We can’T cut all of them out at the ballot box, we need some really strong leaders to stand up and say “NO MORE”!! Where are they? We will have their backs if they will just STAND UP!!

  • dbeatthestreet

    Americans who lost jobs and got behind on mortgage’s are deadbeats? The government has income coming in yet cannot meet it’s payment obligations. what a clueless comment.

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