likely to follow default
China’s Deputy Finance Minister Zhu Guangyao warned the US on Monday. Click image to enlarge.
AS THE UNITED STATES stumbles through the government shutdown towards the debt-ceiling crisis, its potential catastrophic effects are already causing ripples – political and economic – around the globe.
And warnings have already started to appear that if the House Republicans allow the country to go over this cliff, another worse crisis would be upon us almost immediately.
That would be a constitutional crisis, as expertly outlined by a professor of history in The New York Times on Tuesday.
The president could invoke emergency powers under the 14th Amendment – and the GOP in the House, like they did in the Clinton years, might decide to impeach him.
The future is looking more perilous by the minute.
IT’S STARTED ALREADY. From the BBC and other mostly foreign media on Monday, we learn that China tells US to avoid debt crisis for sake of global economy.
“A senior Chinese official has warned that the “clock is ticking” to avoid a US default that could hurt China’s interests and the global economy,” the story notes.
The BBC story about the Chinese warning over the debt ceiling. Click image to enlarge.
China, America’s largest creditor, is “naturally concerned about developments in the US fiscal cliff,” vice finance minister Zhu Guangyao said.
He asked that “the US earnestly take steps to resolve” the issue.
This is just the beginning.
We warned about this over a week ago in Shutdown a major headache for millions, but much worse may lie ahead.
As the shutdown drags on, the catastrophe begins to unfold.
For more details, we turn to The New York Times columnist Joe Nocera, who expertly lays out Why the Debt Ceiling Matters.
“Tea Party Republicans seem to be almost rooting for the government to default, as if that would somehow bring about the smaller government they so yearn for,” Nocera wrote on Tuesday.
“A failure to raise the debt ceiling … does have the potential to diminish the value of one of America’s greatest assets — the backing of its debt — while throwing the world economy into chaos.”
And the chaos could have catastrophic consequences, not only for America.
“U.S. government debt is the only risk-free asset in the world. That debt undergirds the entire world financial system — precisely because the whole world has such faith in it,” Nocera explains.
“Almost every other asset you can think of is in some way measured against it. A default would destabilize the market for Treasuries. And that, in turn, would likely destabilize every other asset.”
HOWEVER, DEFAULT WOULD not only trigger a cascading series of enormous economic crises, it probably will lead to a constitutional crisis of major proportions.
The New York Times update, “Fear around the globe.” Click image to enlarge.
This is clear in the outstanding historical analysis of the 14th Amendment provided in Obama and the Debt on the op-ed page by Prof. Sean Wilentz, professor of history at Princeton University.
“The Republicans in the House of Representatives who declare that they may refuse to raise the debt limit … are proposing a blatant violation of the 14th Amendment, which states that “the validity of the public debt of the United States, authorized by law” is sacrosanct and “shall not be questioned,” Wilentz writes.
“[The historical] record clearly shows that Congress intended the amendment to prevent precisely the abuses that the current House Republicans blithely condone.”
If the GOP forces a default, it would violate a “fundamental principle” of the Constitution.
“[I]f worse came to worst, [the president] would, once a default occurred, use his emergency powers to end it and save the nation and the world from catastrophe.
“It is always possible that if the administration follows the two-step constitutional remedy, the House might lash out and try to impeach Mr. Obama.”
IT IS ACTUALLY more than possible. Remember the Clinton thrashing at the hands of the House of Representatives in 1998?
“Recent history shows that an unreasonable party controlling the House can impeach presidents virtually as it pleases, even without claiming a constitutional fig leaf,” Wilentz noted without precisely referring to the Monica Lewinsky affair.
A CNBC report also included the stark warning: “Don’t mess with our money.” Click image to enlarge.
Finally, even The New York Times editorial board highlighted the already emerging consequences 10 days before the crisis arrives.
In the editorial The International Fallout
it notes some effects already in progress:
“The Republican-induced government shutdown and the party’s threats to create another crisis next week over the debt ceiling are causing harm internationally as well as at home,” the editorial says.
“They are undermining American leadership in Asia, impeding the functioning of the national security machinery, upsetting global markets and raising questions about the political dysfunction of a country that has long been the world’s democratic standard-bearer.”
That Congress is paralyzed over the shutdown of the federal government is bad enough.
But House Republicans are not watching the oncoming light of the speeding train heading down the tracks towards all of us.
It is flashing bright red. “Red alert!” as Capt. Jean-Luc Picard of ‘Star Trek’ would say. “Battle stations, everyone.”
If they don’t pay attention to reopening the government so they can move past it to derail the debt ceiling crisis, all bets are off. The consequences are almost too terrible to contemplate.
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