Wednesday, May 18, 2011

Debt ceiling is unconstitutional. Geithner, members of Congress, should be sued!



The debt ceiling constrains the ability of the Federal Government to pay its debts even though the Constitution mandates that it do so.

In addition, Section 4 of the 14th Amendment states:

"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."

Treasury Secretary Geithner has already stopped paying gov’t pensions in direct violation of the 14th Amendment and he may soon be forced to stop paying Social Security. He should be sued along with members of Congress who are using this statute—the debt ceiling—to trump the Constitution. In the case of a statute versus the Constitution, the Constitution wins!

There is a strong legal case to be made here and the Supreme Court has already upheld Section 4 in a prior case.

Any lawyers willing to take this up on a "pro bono" basis?

22 comments:

Andrew Rogers said...

Quite compelling indeed.

Mike, not to go off topic, but have you ever approached your alma mater with MMT in an effort to influence their econ curriculum?

Have you heard Warren's Penn story? He shared with me on his blog:

"so I had a meeting with [Abel] set up by a benefactor (George Weiss) and we went through it all, which he understood, such as the loans create deposit direction of causation, federal deficits add nfa to non govt sectors, etc. and he acknowledged they were all teaching it all the other way around. so i asked him about doing something about it- like getting it taught correctly. He said he wasn’t interested in that, but that he’d set up a new trading desk area for students to learn to function in the financial markets, and asked if I wanted to help with that. I declined, of course, and he never could understand why."

Abel wrote my macro econ text along with Ben Bernanke.

Crake said...
This comment has been removed by the author.
Crake said...

Playing devils advocate:

It might be valid to argue that the following:

“including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion”

legally pertains to military salaries and pensions only and perhaps specifically to military salaries related to civil wars or internal rebellions.

This clause came from Southern congressmen complaining about Union soldiers getting paid after the war but obligations to confederate soldiers not being entertained by the US. I think it was added to legally shut them up, so could it be construed as pertaining to military only pay and pensions?

traderscrucible said...

Thats a great catch Mike. Unconstitutional!

Matt Franko said...

Crake this from wiki:

"Section 4 confirmed the legitimacy of all United States public debt legislated by the Congress. It also confirmed that neither the United States nor any state would pay for the loss of slaves or debts that had been incurred by the Confederacy. For example, several English and French banks had lent money to the South during the war.[46] In Perry v. United States (1935), the Supreme Court ruled that voiding a United States government bond "went beyond the congressional power" on account of Section 4.[47] Republican economist Bruce Bartlett argues that Section 4 renders the debt ceiling unconstitutional, and obligates the President to consider the debt ceiling null and void.[48]"

So it really looks like it was just about "debts" if this is to be believed.

Then there is this part: "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."

If this was ever translated into a criminal statute, (I'm looking into this) we should also be throwing a lot of these morons in jail right now....

Resp,

Mike Norman said...

Andrew,

Warren's story is similar to a conversation I once had with Bob McTeer, former president of the Dallas Fed. He used to be a frequent guest on my radio show and he understands MMT. I asked him why our policy makers couldn't talk about how there is no debt problem, or why the gov't is never spending constrained or why taxes don't function to "fund" the gov't, etc. He said "politically, you just can't say that." I thought that was such a lame statement.

Crake said...

Mike,

In Bob McTeer’s comment, “politically, you just can't say that", what does he exactly mean? Do certain groups gain political power from legislating under the premise that spending is revenue constrained or are leaders afraid government would go crazy in spending? Or something else?

Adam said...

Some historic perspective of the meaning of national debt.

Republican platform of 1864.

10. Resolved, That the National faith, pledged for the redemption of the public debt, must be kept inviolate, and that for this purpose we recommend economy and rigid responsibility in the public expenditures, and a vigorous and just system of taxation; and that it is the duty of every loyal state to sustain the credit and promote the use of the National currency.

Adam said...

Republican Party Platform of 1868.

Third—We denounce all forms of repudiation as a national crime; and national honor requires the payment of the public indebtedness in the utmost good faith to all creditors at home and abroad, not only according to the letter, but the spirit of the laws under which it was contracted.

Fourth—It is due to the labor of the nation, that taxation should be equalized and reduced as rapidly as the national faith will permit.

Fifth—The National Debt, contracted as it has been for the preservation of the Union for all time to come, should be extended over a fair period of redemption, and it is the duty of Congress to reduce the rate of interest thereon whenever it can be done honestly.



This is what they meant of National Debt at the time and why it was so important.

Mike Norman said...

Crake,

I thought his remark was a cop-out. It suggested that the electorate was too dumb to be educated on these matters, while at the same time, indicating that many politicians felt saying these things would result in a huge political liability.

Letsgetitdone said...

Mike, I don't think the debt ceiling is necessarily unconstitutional. It all depends on whether Congress has provided an alternative way for the Executive to pay debts other than bowwow more money. Congress has provided that way in the form of jumbo coin seigniorage. The profits from coing seigniorage are not counted against the debt limits, but are now accounted for as miscellaneous receipts (revenue).

Having said that, I also think that Geithner should be sued by those the Federal Government is now stiffing with one of the remedies being that Geithner immediately use coin seigniorage to ensure continuing positive balances in the TGA account, I've blogged this here: http://www.correntewire.com/president_obama_stop_breaking_law_use_coin_seigniorage

here: http://my.firedoglake.com/letsgetitdone/2011/05/18/president-obama-stop-breaking-the-law-use-coin-seigniorage/

and here: http://www.ourfuture.org/blog-entry/2011052018/president-obama-stop-breaking-law-use-coin-seigniorage


And will be posting it to the Money and Public Purpose at DailyKos tomorrow.

beowulf said...

legally pertains to military salaries and pensions only and perhaps specifically to military salaries related to civil wars or internal rebellions.

Correct, "pension and bounties" refers to Union army veteran benefits (not surprisingly, Confederate vets never received a pension from the federal govt they levied war on). Of course, Section 4 isn't ONLY about Grand Army of the Republic pensions, anyone with a contract with Uncle Sam has a 14th Amendment right to be paid, yes even Indian tribes.

The United States and two Indian Tribes have entered into agreements in which the Government promises to pay certain “contract support costs” that the Tribes incurred... The question before us is whether the Government’s promises are legally binding. We conclude that they are.
http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=000&invol=02-1472

Matt Franko said...

US Code, Title 18, Part I, Chapter 15 Section 287:

"Whoever makes or presents to any person or officer in the civil, military, or naval service of the United States, or to any department or agency thereof, any claim upon or against the United States, or any department or agency thereof, knowing such claim to be false, fictitious, or fraudulent, shall be imprisoned not more than five years and shall be subject to a fine in the amount provided in this title."

link_http://www.law.cornell.edu/uscode/718/usc_sec_18_00000287----000-.html

It's a start.

Crake said...

Mike, Thanks for answer. That “political” answer makes a lot of sense (I was thinking maybe it was a more detail reason, instead of the straight forward answer.)

Last night, I was thinking about how difficult of political position this situation is. For example, it is pretty easy to conclude there would be a lot of economic upheaval if the government was forced to default by the debt ceiling but public opinion seems to not think so and wants the debt ceiling to be enforced along with spending cuts. That is the political “reality.”

Averting disaster via executive order declaring the debt ceiling unconstitutional or by other legal means is viable but politically would be a death nail because of that “reality.” The politics would be simple –just as with the stimulus, claim that nothing bad would have happened and opine that we should have let the government default etc. etc. Then that “reality” in public opinion, siding with that opposing position, would take hold and the White House would politically lose greatly.

Tom Hickey said...

This is the obstacle to most MMT policy solutions. The public is so programmed that they cannot recognize what is in their interest. That's what propaganda is designed to do, after all.

Matt Franko said...

"knowing such claim to be false, fictitious, or fraudulent, shall be imprisoned"

I think David Walker could be jailed based on what he has testified to vs what he has told Mike in person....

Resp,

Letsgetitdone said...

@ Crake.

"Last night, I was thinking about how difficult of political position this situation is. For example, it is pretty easy to conclude there would be a lot of economic upheaval if the government was forced to default by the debt ceiling but public opinion seems to not think so and wants the debt ceiling to be enforced along with spending cuts. That is the political “reality.”

Averting disaster via executive order declaring the debt ceiling unconstitutional or by other legal means is viable but politically would be a death nail because of that “reality.” . . . "

I disagree with this theory. First, I don't think that debts and deficits are that big a concern of the American people. Every poll indicates that people are much more concerned about jobs, medical care, corporate bailouts, the cost of oil, and avoiding a double-dip recession. I think the majority would be much more concerned with the consequences of default, once these are spun for them than they are about the debt ceiling.


And second, If coin seigniorage is used to avert the problem, then it will become apparent very quickly that the national debt subject to the limit is declining sharply. When Obama explains that part of te reason he's doing this is to pay down debt and create space between the public debt subject to the ceiling and the ceiling itself, people will begin to see this as a viable solution.

The only reply the opposition will be able to make is that inflation will be caused by using seigniorage. But it won't, so long before November of 2012, it will be apparent that the debt ceiling is not problem and Obama's way of getting out of the problem was a smart one.

In short, I think the coin seigniorage solution is easy to spin and is wholly within Obama's control, since he can veto any changes to the law that would take it off the table. The oposition can scream "inflation." But there will be no inflation. So their spin will fall on deaf ears.

beowulf said...

Matt, claim = invoice.
I believe that statute is used by the federales to prosecute Medicare billing fraud.

The crime you're looking for malicious mischief (of course, whether "the validity of the public debt.. shall not be questioned" trumps the First Amendment is a novel question)

Whoever willfully injures or commits any depredation against any property of the United States, or of any department or agency thereof, or any property which has been or is being manufactured or constructed for the United States, or any department or agency thereof, or attempts to commit any of the foregoing offenses, shall be punished as follows:
If the damage or attempted damage to such property exceeds the sum of $1,000, by a fine under this title or imprisonment for not more than ten years, or both...

http://caselaw.lp.findlaw.com/scripts/getcase.pl?court=us&vol=000&invol=02-1472

Matt Franko said...

Beo,

If at first you dont succeed:

Title 18 Part I Chapter 47 Section 1001:

Statements or entries generally

(a) Except as otherwise provided in this section, whoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully—
(1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact;
(2) makes any materially false, fictitious, or fraudulent statement or representation; or
(3) makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry;
shall be fined under this title, imprisoned not more than 5 years or, if the offense involves international or domestic terrorism (as defined in section 2331), imprisoned not more than 8 years, or both. "

link_http://www.law.cornell.edu/uscode/718/usc_sec_18_00001001----000-.html

Checkmate? Resp,

Crake said...

@Letsgetitdone,

“And second, If coin seigniorage is used to avert the problem, then it will become apparent very quickly that the national debt subject to the limit is declining sharply. When Obama explains that part of te reason he's doing this is to pay down debt and create space between the public debt subject to the ceiling and the ceiling itself, people will begin to see this as a viable solution.

The only reply the opposition will be able to make is that inflation will be caused by using seigniorage. But it won't, so long before November of 2012, it will be apparent that the debt ceiling is not problem and Obama's way of getting out of the problem was a smart one.”



It shouldn’t, but as with oil and grain prices now, speculators will think it will cause inflation and will divert more to long contracts in commodities, pushing up prices financially. Then opponent will point to that to say, “I told you so.”

beowulf said...

Matt, the key phrase there is... "in any matter within the jurisdiction of the executive, legislative, or judicial branch..knowingly and willfully..."

Ahh, the Martha Stewart law, that's the statute that makes lying to an FBI agent (or any other federal official) a felony. Lying to Congress or to the SEC are covered by separate statutes (but would otherwise fall under this statute).

Who knows how many felonies Yogi Bear committed by lying to Ranger Smith. To paraphrase the line from Deadwood,"there're ain't no law in Jellystone, c________."

Letsgetitdone said...

@ Crake I agree that some cost-push inflation could result from false expectations about the effects of coin seigniorage. However, that's a conjecture. Working against it are other forces. 1) The Administration's decisive action in taking the debt ceiling issue off the table would initially strengthen the USD, 2) Once it was clear to everyone that seigniorage was being used to reduce the national debt, the tendency for USD to rise in value would be very strong. 3) The speculators will have recently experienced the bursting of the present commodity price bubble (which appears to be going on right now.) So, the chances are much less that they'll be ready to gamble again on a weakening USD and, once again, speculate in commodities while a very strong trend towards the dollar is occurring.