I was picking up some paperwork from my accountant, who also happens to be a very astute political analyst and an attorney, when the conversation turned to the debt ceiling debacle.
"Well," I commented, "it would be politically risky, but I suppose the President could just invoke the 14th amendment."
"I think that's what the Right is counting on," my politically astute accountant harumphed.
"What?" I asked, certain that the answer was not going to make me happy.
"Well, the 14th amendment applies to debts--not spending. I suspect a conservative court will agree that the President can use the 14th amendment, but only to pay existing debt obligations."
"Which means...?" I sheepishly asked, beginning to see where this was going.
"We won't default. We bring in enough revenue to cover our outstanding debt obligations. We don't bring in enough to cover our other expenses like Medicare, Veterans benefits, and all the things that we like government doing. The interest payments will have to be made, and everything else will automatically be cut, because they are expenditures, not debt."
I shuddered as I considered the possibility. Right now roughly 40 cents of every dollar spent is borrowed. With no further borrowing and no increase in revenue...it's ugly out there pretty quickly (unless you are a conservative demagogue). You can pay your existing debt--but what gets cut that the 40 borrowed cents has been covering?
This is just one guys observation, but he's usually spot on. (He predicted this exact scenario when the Bush tax cuts were extended).
My smugness is gone--the 14th amendment may be the Trojan Horse.
Update: Some comments have pointed out that SS is a creditor (holds bonds) so it would be treated like any other creditor.