David B. Rivkin Jr. and Lee A. Casey explain why it's impossible for the United States to default on its debts.
Those who warn of default confuse debt payments with other spending obligations. "A failure on the part of the United States to meet any obligation, whether it's to debt holders, to members of our military or to Social Security recipients, is effectively a default," Treasury Secretary Janet Yellen said in January.That's nonsense. Authorized and even appropriated spending isn't "the public debt." For constitutional purposes, promised benefits from Social Security, Medicare and other entitlements aren't even property, as the Supreme Court held in Flemming v. Nestor (1960), and Congress has as much authority to reduce them as to increase them. When lawmakers were drafting the 14th Amendment, they revised Section 4's language to replace the term "obligations" with "debts." If the Treasury ran out of money, the constitutional obligation to pay bondholders would trump all statutory obligations to spend.
Ms. Yellen also said that "Treasury's systems have all been built to pay all of our bills when they're due and on time, and not to prioritize one form of spending over another." But as the Journal has reported, department officials conceded in 2011 that the government's fiscal machinery certainly could prioritize payments to bondholders, and the Federal Reserve prepared for such a contingency. There's no question enough money would be available: The government collects roughly $450 billion a month in tax revenue, more than enough to cover the $55 billion or so in monthly debt service.
We've got plenty of money to make debt payments, but we may need to cut other spending to do it -- which we would be Constitutionally required to do.
(HT: Instapundit.)
