A second playbook is needed

The president's view of no negotiations could spark a constitutional crisis as shutdown looms.

By Jim Cramer Oct 7, 2013 10:32AM

US Capitol © Donovan Reese/Getty ImagesIt's pretty binary now.

 

TheStreet logo

You can write whatever you want, but in a default it is going to be game over and right now the stance from both sides -- not the president and not the GOP alone -- would definitely take us over the cliff. If it is not possible to dislodge the president from his view of no negotiations and it is not possible for the speaker to call for a majority-rule vote, then it is hopeless and we will have a default and there is no way this market can handle a default without giving up a huge chunk of gains.

 

Given the rhetoric, once again it seems odd that Treasuries aren't going down in price and up in yield. But there is a complacency -- and there has been a complacency -- that seems a little unrealistic considering the stances that both sides are taking.

 

What's odd for me is that if the president truly believes that it's the constitutional duty of Congress to raise the debt ceiling, then why isn't he preparing a constitutional initiative with the Supreme Court? If he truly believes no negotiations should occur, then he definitely believes that there is a constitutional imperative. It simply can't be anything else, can it? If the speaker has said point blank that he does not have the votes for a clean debt bill then the president must know that his debt ceiling non-negotiable stance will cause a constitutional crisis. Unless he, too, doesn't believe that a default is a constitutional issue.

 

Ironic, but we know that the 14th Amendment has a clause that says the bills must be paid. Sure, it is tied to the notion of an intransigent block that has seceded, but it is still in and it is a totally viable argument.

 

In the meantime we know the Oct. 17 date is looking specious given how much Treasury has been taking in from Fannie/Freddie and TARP, so it would help to know the real date, even as we know that a real date will be the date we get to plus one.

 

Also confounding me is what's the plan for a default? We know now that the plan seems to be that federal employees look to be paid for their time off. Does that mean there is some clause that will allow the president to pay bills in lieu of failure to raise the debt ceiling? Is there scrip? Is there a promise of some sort that would make it so a default is not catastrophic?

 

Or do we now begin the process of deciding which companies don't need credit to operate their businesses and so therefore don't need the full faith and credit of the U.S. to stand behind Treasurys. Do we just eliminate all banks from the equation? We just can't own their stocks? Do we have to eliminate owning all retailers because they need credit? Do we dust off the Lehman playbook? Wouldn't that be smart?

 

I think these are the issues that now will dog us. There's not much else to say other than a second playbook is needed given the binary nature of the ceiling debate.

 

To operate as if one isn't needed is to insist that a constitutional crisis is NOT on the table, just a political one. If that's the case, then a political one, at least right now, leads to debt downgrades, no credit to be given to anyone of any substance and a ripple around the world that can't be imagined.


Jim Cramer's headshot


More from TheStreet.com

128Comments
Oct 7, 2013 11:44AM
avatar

Is America insane???? We have a federal debt of 17 trillion; we will have a budget deficit this year of 600 to 700 billion; we have more government programs then we can afford. And we are fighting over adding another government program (Obama care). Are we nuts????!!! Congress is voting to pay government employees to sit on their **** while the American people cannot find jobs and what they can find are minimum wage and part time. Are we insane????!!! When the hell does America start facing reality???!!

Oct 7, 2013 11:11AM
avatar

Obama is right and so are the Republicans. ACA is the law and you don't change it by blackmail but the US is spending way too much more than it's collecting in taxes. If the Republicans want to fix the budget deficit, debt ceiling, then they have to put everything on the table including defense, social programs and taxes. The US government should not be protecting the entire world using US taxpayers funds, it should not be educating citizens using federal tax dollars that's why have property taxes, it should not give Medicare and Social Security benefits above the amount individuals have earned.  It should not spend more than 10% more then it collects in taxes. It's all pretty simple math but our politicians are crooks and lairs that buy votes with other people's money.

Oct 7, 2013 12:10PM
avatar
No back pay for furlough days !
Don't like it ?    Don't work for the Feds.

Time to bring this paper fraud down and let hard values prevail.

Oct 7, 2013 11:07AM
avatar
The problem is that the potus is incompetent. We need a leader and he is not a leader.
Oct 7, 2013 11:43AM
avatar
Grid lock in Washington on budget........... borrowing limit deadline approaching........  Obama to world...... Lets talk about the name of that football team....... LMFAO
Oct 7, 2013 2:50PM
avatar
If you really want this Congress and President to run your healthcare, Then you are a really special kind of stupid!
Oct 7, 2013 11:23AM
avatar
Rule number one in DC.  Nothing happens unless both parties agree.  Which means a budget default will happen because both parties agree to let it happen.  And remember this is and always has been rule number one.  So why would they both sit back and allow a default?  Like I pointed out last week when the US federal Government is declared bankrupt the house representatives inherit the positions of regulators of the affairs of the US. Carte Blanch is their intended result and supported by law.  A law of which they were the creators.  JMHO
Oct 7, 2013 1:09PM
avatar
Furloughed federal employee to friend....... "It's just awful you can't plan a trip around this"
Oct 7, 2013 11:03AM
avatar
The manipulators sure did gorge themselves at the swill trough this morning.  Boehner gave them plenty of sound bites to manipulate
Oct 7, 2013 11:48AM
avatar
I see the Asian Rim is more formally recognizing they are running out of American money to keep on spurring their economies.  This entire experiment of introducing Capitalism to the Asian Rim will become another sad political tragedy.  The British tried it in the 1800's and failed but let us not learn from them.  The culture is 5000 years old and a few years of cheap American dollars will be forgotten in a heartbeat.  You gotta love all the trade loyalty that Japan showed buying airplanes from Airbus after all the jobs Boeing sent to the Asian rim to support their using their planes.  This is just a precursor to how quick they will abandon us after our cheap trade becomes less cheap. And of course we will do the same in return as we abandon China for India, Bangladesh and then Mexico and Central America. All this Free trade will turn into a very expensive nightmare for most of the citizenry of all countries abandoned as the Internationals either get kicked out or move on to easier pickings.  Just another slash and burn form of economics. Economic chaos will sadly flourish now but you should never be confused as it is a symptom of totalitarianism and to sit and see it prosper is very alarming.  The pall we are feeling in America now is the unforgettable pall of socialism.  Recognize it for what it is and fear it for where it will lead.  JMHO
Oct 7, 2013 2:00PM
avatar

seems like the politicians are working to some new Social Media Standard of always having to have a calamity to deal with. 

 

and if none exists, create one. 

Oct 7, 2013 11:35AM
avatar
The new DC football team name.......... Washington Bureaucrats
Oct 7, 2013 11:05AM
avatar
And now we have the 7th or 8th personality, Brent the Pensioner.  
Oct 7, 2013 3:40PM
avatar

The unfortunate solution is to default on our debt.  It is impossible to repay it.  The US's Golden Age is over.  We are now a consuming country, instead of a producing country.  We cannot have economic growth that will be able to match the government's spending.  And politically, polititions don't have the character to put the country's welfare ahead of their own careers.

If we defaulted, we would negotiate some kind of payment plan to our creditors (China), and we could start over, paying as we go.  This would hurt, obviously, but it would also correct the problem.  If the consequence of default is no more credit, than good; the government would need to pay for their programs instead of buying votes with my children's future.

If the US was considering a war, the government would need to levy taxes to pay for it, and the hawks would have to answer to the voters.  I don't care about Dems or Reps; give me someone who will fix the real problems the country faces.

avatar

Seems to me the solution to the problem of Obama Care can be solved many ways.

 

First as it is a tax on the American people (Supreme Court) it needs to be tabled and introduced as an amendment to the constitution just like the income tax was. Also there are a few problems with it being a tax. The money is not being collected by a Federal Agency and then used to buy goods and services. Instead it is sent directly to the insurance companies with no checks or balances that the crooked insurance companies will not steal the premiums and put in their own pockets -- right now on average 40 percent of premiums going for insurance are used to pay executives huge bonuses and huge dividends to share holders.

 

Second the tax should be on income like the medicare and medicaid tax and extend to all income someone is making. About 7 to 10 percent tax on all income. As it stands now the older people are going to have to pay an unfavor tax burden for the Obamacare tax and having four favors of Obamacare bronze,silver,gold and platinum causes a four tier discrimination of the American people. Which is against the consitution and the equal rights act. After all it is a tax folks.

 

Third Obamacare will not solve the problem of health care in America as more than half of all Americans make less than $1 trillion dollars combined among all of them. This means that half of Americans on average only make $16,230 dollars a year which is enough for most of them to have a Obamacare tax credit of about $10,000 plus each for all 66 millions of them.

 

This alone will put a burden of $660 billions dollars on the US government paying for Obamacare for people who can not afford it.

 

Also another 46 million Americans will not qualify for the tax credits and will have to get Medicaid paid for by the state which can only pay for about 23 million Americans. So the burden to Medicaid will be about 23 million times $10,000 or about another $230 billion on the US government.

 

Altogether about $1 trillion extra tax dollars will have to be spent on Obama Care.

 

The silly people were using an average wage of $118,000 per person working (remember half the income in America is earned by only 1 percent of the population) so they figured most people could afford Obamacare. The opposite is true.

 

Pretty much a) Obamacare is illegal and b) Obamacare is going to cost the government $1 trillion more dollars and c) Obamacare will not fix what is wrong with health care.

Oct 7, 2013 11:52AM
avatar
IDK ... we are insane ...the world laughs at us as we implode ...
Oct 7, 2013 3:00PM
avatar
Regardless of whether or not the debt ceiling is raised, the US will default on at least a portion of it's debt. In fact, via Fed currency debasement each dollar the US pays to it's creditors is worth less than the dollar it borrowed in the first place. Much less over time. The Chinese will be royally screwed. As will Social Security and Medicare recipients. 
Oct 7, 2013 3:07PM
avatar
Will the President negotiate? Why? While I don't like the rates being charged in the ACA, it's federal law and it was upheld by the Supreme Court. So  he should negotiate because these nuts think he should? Then Cramer is nuts too (not news)!
Oct 7, 2013 11:35AM
avatar
Mr Cramer, we all know the problem, what is the solution???
Oct 7, 2013 4:57PM
avatar
I tell you what...........  If all the politicians in Washington including Obama have to get their health care through the ACA. That is the only change I need. I'm fine if that happens.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

118
118 rated 1
270
270 rated 2
472
472 rated 3
714
714 rated 4
624
624 rated 5
608
608 rated 6
623
623 rated 7
445
445 rated 8
319
319 rated 9
125
125 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
AAPLAPPLE Inc10
ATVIACTIVISION BLIZZARD Inc10
BIDUBAIDU Inc10
BMYBRISTOL-MYERS SQUIBB CO.10
CELGCELGENE CORP10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.