Big business pressures Biden to cut ‘entitlement programs’

But back to the current argument that it would be more “calamitous” for Biden to avoid a default than for default to happen. That’s total bullshit. Defaulting on the debt would throw the global economy into crisis. Millions of people would lose their jobs or face dire economic damage overnight. Defaulting would trigger a recession that would likely snowball into a global one. Biden invoking the 14th Amendment to protect the full faith and credit of the U.S. would throw political pundits into a tizzy and piss off Republicans, but it wouldn’t throw the nation into economic chaos.

The Chamber is doing what it always does: looking out for the rich and for corporate America. That includes siding with the Republicans, even when the economy is at stake. Meanwhile, small businesses—the engines of commerce the Chamber is supposed to be representing—are already feeling the effects of a possible default. The uncertainty is enough to create real panic and impact their business.

“This really has the potential to be catastrophic,” Rosemary Swierk, president of Direct Steel and Construction, told The Washington Post. Her business has federal contracts which account for about half of its income. “If we have to shut down a project, that’s 300 people who aren’t working anymore. Then what do we do? Do we keep people on payroll? Do we lay them off?”

“What’s the contingency plan if we wake up on X-date and don’t have enough cash to pay everybody? We just don’t know,” David Berteau added. He’s chief executive of the Professional Services Council, a trade association of federal government contractors. “There has been remarkably little visibility into what happens if we do default. Which bills will get paid and which won’t? We’re talking paychecks, rent, contract invoices, electricity bills.”

The Post talked to Andrea Kerns, who’s an officer for her family’s chain of grocery stores. They’re seeing customers already in panic mode, stocking up on cheaper meats and staples. Her company is already pivoting to keep less expensive items in stock versus more expensive meats like beef, while also replacing brand-name goods with more budget-friendly store brands. This is an attempt to shore up the business in the event that there’s a default or that drastic cuts are forced through by Republicans as part of the negotiations.

“Any pause, any delay, any cuts to SNAP benefits would directly affect our shoppers’ ability to get food onto their tables and it would 100 percent impact us,” said Karns. “There is certainly a lot of concern about what might happen.”

That’s apparently what the Chamber and Republicans are rooting for. By all indications, they want the American people, including small businesses, to feel pain and blame that pain on Joe Biden and the Democrats. They’re telling their members to encourage Republicans to keep up the negotiations and inflict those painful budget cuts. So far, Biden seems willing to negotiate how much pain the rest of us will endure to keep the U.S. from going off the fiscal cliff.  

Here’s the full letter from the Chamber:

Dear Mr. President:

On behalf of the United States Chamber of Commerce, I write today in response to the letter you received yesterday from Senator Bernie Sanders and ten of his colleagues related to the debt limit and specifically with the suggestion that your administration prepare to exercise “your authority under the 14th Amendment of the Constitution.”

It is the Chamber’s view that attempting to invoke so-called “powers” under the 14th Amendment would be as economically calamitous as a default triggered by a failure to lift the debt limit in a timely manner.

The argument that the Executive Branch can simply issue new debt over and above the debt limit to ensure that the federal government has sufficient resources to meet its obligations is not supported by the text of the Constitution and ignores the obvious negative economic consequences that would occur if the administration attempted to issue such debt. The Constitution is clear, the power to “borrow money on the credit of the United States” is given to Congress (Article I, Section 8) and not the Executive.

This is supported by the full text of the 14th Amendment (notably the letter you received from Senator Sanders and his colleagues omitted a foundational clause replacing it with ellipsis).

Section 4 of the 14th Amendment reads in full:

“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any state shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.” (Emphasis added).

Debt issued by the federal government must be issued in accordance with law. The relevant law at the moment is the statutory debt limit (31 U.S. Code § 3101). The 14th Amendment does not provide any authority or power for the Executive to issue debt beyond what has been authorized through the normal process for enacting laws.

If the Treasury Department attempted to borrow money above the statutory limit to pay obligations of the government, it would ignore the separation of powers enshrined in our Constitution and the validity of that debt would immediately be called into question.   The infirmity of this path is underscored by your own acknowledgement that the validity of such debt would be subject to litigation and by Secretary Yellen’s recent characterization of such a future act as “legally questionable.” Notably, such debt would not be subject to the guarantee provided under the 14th Amendment because it would not have been “authorized by law.”

Purchasers of U.S. treasuries, if they are even willing to purchase debt issued over and above the statutory limit, would demand a significant interest premium. This in turn would raise overall borrowing costs not only for the federal government, but also the private sector as interest rates in the private sector are often measured against the interest rates on U.S. treasuries. The legal uncertainty around this debt combined with increased interest costs would impose significant and long-term costs on the economy similar to default.

Simply put, there is no alternative to reaching a bipartisan agreement to raise the statutory debt limit.  We are grateful for your engagement with Speaker McCarthy and urge you to continue your efforts to reach a successful and timely agreement.

 

Sincerely,

Neil L. Bradley

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Hell yeah! Democrats and progressives simply crushed it from coast to coast on Tuesday night, so co-hosts David Nir and David Beard are devoting this week’s entire episode of “The Downballot” to reveling in all the highlights. At the very top of the list is Jacksonville, where Democrats won the mayor’s race for just the second time in three decades—and gave the Florida Democratic Party a much-needed shot in the arm. Republicans also lost the mayor’s office in the longtime conservative bastion of Colorado Springs for the first time since the city began holding direct elections for the job 45 years ago.