An often overlooked part of constitutional law is the timeframe given to the President after a bill is passed by Congress, wherein he can choose whether to sign the bill into law or veto the bill before it becomes a law by default. The window provided by the Constitution, under most circumstances, is ten days excepting Sundays.
If Congress were to convene Monday and pass a debt ceiling resolution, the President (by my often flawed math) would not have to sign or veto it until August 5 - three days after the August 2 deadline.
Of course, the President could wait until August 5 and veto the bill at the last possible moment. Then, two-thirds of each chamber would have to vote to override the President's veto. Should either chamber fail to do so, the ten day clock would begin ticking anew with any other debt ceiling resolution that cleared both houses.
The President would not have to muster much support in Congress to prevent a veto from being overridden, especially if congressional democrats were included in the plan. Between the sixty or so house republicans that have refused to vote for any kind of debt limit increase and the eighty or so members of the progressive caucus, the President has very nearly all the no votes he needs in the House to prevent a veto override.
I bring this up, because the President is now in a position to unilaterally dictate the terms of any debt limit increase to Congress. Perhaps more importantly, the President is in a position to play a game of brinksmanship with Congress that he is fully empowered to win or end at any time, thanks to the fourteenth amendment. Should things fall to hell, the President can rectify the situation with the stroke of a pen.
I propose that the President should fully capitalize on this historic opportunity. He should abandon any talk of cutting "entitlement" programs. The republicans (predictably) refused to negotiate in good faith on that score, and he doesn't need them anymore. Instead, the President should insist that any debt ceiling resolution take a "balanced" approach to long-term deficit reduction by gutting frivolous subsidies, reducing Pentagon spending, eliminating the Social Security cap, closing tax loopholes and increasing government revenues (read taxes on the wealthy). I think a six-trillion dollar deal would suffice.
After all, who benefits most from a debt ceiling increase? As I see it, investors and their handlers do. You know the type: the guy that spends his days wading in the pool, waiting for his dividend check to arrive in the mail; The Wall Street trader who need a somewhat stable environment to work in, if she is to make informed investment decisions; the CEOs and CFOs who raise capital by borrowing money or issuing debt notes at interest rates that are directly tied to the value of the full faith and credit of the US government; the bankers who are so highly leveraged in vulnerable securities markets that a stiff breeze can topple their positions; the media moguls (I'm looking at you Murdoch) whose fortunes can vanish in a momentary, well-pronounced lapse of investor confidence. These are the people that benefit the most from fiat currency. People like me work for a living.
What does a default look like? Personally, I believe that if the President made such a bold move, particularly as the August 2 deadline moves closer and/or passes, it would create a financial panic. On August 3, I think the Dow Jones would take a significant beating; not a full blown crash, mind you, but a substantial drumming. Investors would lose billions. Hair-on-fire traders and financial firms would be faced with the dumbfounding realization that they have been pwned, that they have no choice but to take a tax hit or face... bum bum bum... the alternative. Which is worse: a modest tax hike or a financial smackdown of biblical proportions?
Were such an event to occur, I believe that the well-heeled would rush to the nearest phone booth with a sense of urgency greater than Clark Kent could manage. They would do so in an effort to express their newly found and disturbingly unpleasant sense of powerlessness to their fully bought-and-paid-for Republican congress-critters. I believe they would tap faster than Fred Astaire on high quality methamphetamine. I imagine the conversation unfolding along these lines:
Republican congress-critter: "Hey, well-heeled douche bag! What can I do for you?
Well-heeled douche bag: "You can quit losing my money! That's what you can do for me!"
Republican congress-critter: "What do you mean? We have to fight President Hussein Obama's socialist/fascist/kenyan/communist/marxist/muslim attempt to..."
Well-heeled douche bag: "Shut the f*@k up! Raise the debt ceiling. Do whatever it takes, or the checks stop coming in."
Republican congress-critter: "You betcha!"
Well-heeled douche bag: CLICK
Aside from gaining budget concessions from the opposition party, the President would also succeed in further fragmenting the republicans. For the first time, tea party republicans would get a chance to see how powerful and unprincipled the financial arm of the Republican party really is. The shock of such a revelation may be just enough to split the one from the other and encourage tea-partiers to align with an independent party. If not, it would surely be enough to get certain moderate republican incumbents primaried in 2012. So much the better for team blue.
The best part of it is this: if everything goes wrong; if nothing goes according to plan; if the whole thing begins to blow up in the President's face; if congressional democrats abandon him; he can use the authority given to him by the fourteenth amendment to unilaterally increase the debt ceiling by whatever amount he sees fit. The President... can't... lose.
Watching democrats take republicans hostage would be a nice change of pace. Viewing such a spectacle is near the top of my bucket list. In my opinion, this is the best opportunity they have ever had. I hope they make the most of it.
edited to remove offensive terminology