The Debt Limit and the Fourteenth Amendment

[a-new-machine.livejournal.com]

So, with the shenanigans now going on in the budget talks, the fear of a looming debt limit crisis is growing. Those fears are quite real, and if no deal is reached, a default could have vast and serious consequences.

As a response, many (including Congressmen involved in the debt ceiling fight) have suggested that there is a constitutional bar on the debt limit, which would empower the President to continue borrowing above the limit to ensure that the public debt didn’t go into default. That’s attractive in some ways – it ensures the outcome both parties want, without having to give up anything to Congress. I wanted to discuss that claim in a bit of depth here, as I think it’s important, and will be more so if the budget fight continues much longer.

The relevant language is found in the Fourteenth Amendment, Section IV, which reads “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.” Supporters of the so-called constitutional option claim that this means ”These debts have to be paid. . . in full, on time, without question” . Thus, measures to pay them, such as further borrowing, are not just a good idea, but constitutionally mandated.

The counter-arguments are, IMO, quite a bit stronger. First, there is the point that a default doesn’t question the validity of the debt. A repudiation would be a refusal to acknowledge the debt as legitimate, where as default would be a simple inability to pay a legitimate debt. Others argue that the constitutional burden would cut differently – that borrowing can only be authorized by Congress, and so the Treasury would have to turn to paying the debt and pension obligations, ignoring all others until those are fulfilled each month. This seems the most correct view. It ensures that the constitutionally mandated obligation will be fulfilled, and rightly leaves statutory obligations behind in terms of priority.

That said, none of the constitutional wrangling really matters, because we will never see a final decision on it from any court. Why? Two reasons: standing and political questions. Standing is notoriously difficult for Congressmen to assert standing to sue the President on the basis of allegedly unconstitutional actions, so it’s unlikely the courts will even examine the facts. If they do, the political question doctrine will rear its head. The doctrine basically states that, in a fight between the executive and the legislature, the courts will not get involved. They’ve used this to dodge several other contentious constitutional issues relating to the distribution of power between the legislature and the executive, and I don’t doubt that it’d be invoked here, if standing were found.

So, that’s my $0.02 on the constitutional issue. Breaking the ceiling is not constitutionally requried, IMO, but I doubt anyone will ever be able to stop the president if he wants to do it.

Comments

[malasadas.livejournal.com]

Interesting discussion of the issue here. (http://www.thetakeaway.org/2011/jul/05/debt-ceiling-v-fourteenth-amendment/)

This has been adjudicated only once according to Professor Epps, in the 1935 case Perry vs. United States (http://supreme.justia.com/us/294/330/) where it was ruled that the government HAD to pay its debt.

I think there is a strong argument that the government is Constitutionally bound to NOT default. The salient question is whether that means the debt ceiling has to be raised or, as you indicate, that failing to raise the debt ceiling would mean the federal government would have to divert all of its income towards servicing the debt, shutting down either everything or making across the board cuts to all government functions for whatever amount of time it takes to lower the debt to a level well below the current ceiling or to zero.

That becomes a political firestorm over who gets the majority of voter anger over the immediate and likely very painful cuts it would take to turn enough federal revenue over to debt service.

[a-new-machine.livejournal.com]

I think Perry is distinguishable, because it involves an active attempt by Congress to invalidate old debts. That was not an instance of default, but rather an attempt to discharge gold-based bonds by the abandonment of the gold standard. "We conclude that the Joint Resolution of June 5, 1933, insofar as it attempted to override the obligation created by the bond in suit, went beyond the congressional power." Perry v. United States, 294 U.S. 330, 355 (1935) (emphasis added). Nothing in there about default, but rather about repudiation.

[devil-ad-vocate.livejournal.com]

Since politicians are experts at parsing every portion of the Constitution, I'm not surprised that it happens in every instance. Personally, I don't see how anyone could interpret "validity of the public debt... authorized by law...shall not be questioned" other than "it's a valid debt - pay it when it's due".

"..a default doesn't question the validity of the debt." No, it just means a country that does it is a flake, can't be trusted, and has no business being regarded as a world leader.

You're right; it will never get to court. It ranks right up there on the judicial fear scale with interpreting the 2nd Amendment.

[a-new-machine.livejournal.com]

Yeah man, and we all know SCOTUS will never go there (http://en.wikipedia.org/wiki/McDonald_v._Chicago)...

[devil-ad-vocate.livejournal.com]

... and it only took the SCOTUS a couple of centuries to address that issue.

[a-new-machine.livejournal.com]

Not really. The Fourteenth is only about 150 years old, and before that the Bill of Rights didn't apply to states, period. And they still haven't applied the Seventh to states, so it's not like the Second was unique.

[devil-ad-vocate.livejournal.com]

I bow to your superior knowledge. However, defaulting on a debt still makes one a deadbeat.

[underlankers.livejournal.com]

Bah, the Republican Party that passed the 14th Amendment is a bunch of statist communists. ;P

[underlankers.livejournal.com]

I might note that I think the whole debt ceiling fight is ludicrous in the first place. A debt ceiling that's perpetually raised is akin to putting fig leafs on Michaelangelo's David or the bald guy scraping two hairs over his head: the person doing that might be fooled but nobody else would be.

[rasilio.livejournal.com]

The argument that failure to raise the debt ceiling equals default is nothing more than a political lie. What failure to raise the debt ceiling means is that government spending must immediately be cut to be no greater than government income. Which spending cuts occur are a matter of choice. In fact spending cuts are not even technically required as Congress could in theory pass a massive tax increase or sell off large quantities of government assets to allow spending to continue as before with no additional debt.

[tridus.livejournal.com]

What, you mean we should stop buying $3 billion computer systems that don't work? (http://www.extremetech.com/extreme/89048-us-army-spent-2-7-billion-on-a-battlefield-computer-that-doesnt-work) That's crazy talk!

Seriously though, it's not necessarily a lie. If a bond issue comes due and there's no new issue, then when it's due you need to have the cash on hand to pay it out. It's not just a matter of matching revenue and expenses (though that really needs doing). But if there's no large payment due immediately and it's just day to day expenses, then yes they could immediately shut some things down and avoid a default. It really depends on how the debt is structured at the time the borrowing taps get cut off.

[badlydrawnjeff.livejournal.com]

If a default violates the 14th amendment, then the Obama administration needs to make sure they have a contingency plan if Congress will not increase the debt limit, period.

I think that's ultimately a silly argument, though, and tend to agree that all it would be is a default on debt identified as legitimately.

[malakh-abaddon.livejournal.com]

Eh, whats the worst that can happen? We have to give Texas, California, and some other states back to Mexico. Will we sell Alaska to Canada or Russia? Will we have riots in the streets, with the elders of our society leading the charge?

Maybe it is for the best, that they drag their feet on doing whatever they are going to do with the debt limit.

[telemann.livejournal.com]

Richard Stengel's article for Time Magazine's cover feature on the United States Constitution dealt with this very question:

II. The Debt Ceiling
'The Congress shall have power ... To borrow money on the credit of the United States.'
Article I, Section 8

'The validity of the public debt of the United States ... shall not be questioned.'
14th Amendment, Section 4

No one disputes that Congress has the power to tax. That's one of the very first enumerated powers in the Constitution. The framers created a central government in part to be able to pay off the debts from the Revolutionary War. The country was broke. You might not like the power to tax, but it is one of the basic tenets of representative government. The Boston Tea Party slogan was "No taxation without representation!" It wasn't "No taxation."

There are those in Congress and beyond who suggest that the U.S.'s not raising the debt ceiling and defaulting would be a lesson to a spendthrift government not to borrow more than it can repay. But the idea that we can default on our debt is not only reckless; it's probably unconstitutional. No one is saying the debt is wise and prudent — far from it — but defaulting on it flies in the face of one of the few absolute proscriptions in the Constitution, Section 4 of the 14th Amendment: "The validity of the public debt ... shall not be questioned." The idea is that the U.S. shouldn't weasel out of its debts. It does not say that we can't undertake dumb obligations — the Constitution can't prevent bridges to nowhere — but that we need to pay off the public obligations that we do set for ourselves, whether those are Social Security payments to retirees or interest to Chinese bankers. When Congress borrows money "on the credit of the United States," it creates a binding obligation to pay that debt. (See "Q&A: Mitch McConnell Explains How to Get a 'Really Big Deal' on the Debt Ceiling.")

The debate over raising the debt ceiling is mostly cable-TV playacting. The party out of power is always against raising the debt limit, and the party in power is always for it. When Bush needed to raise the debt limit in 2006, then Senators Obama and Joe Biden voted against it, with Obama saying that raising the limit was "a sign of leadership failure." Since 1962, Congress has enacted 75 separate measures to alter the limit on the debt, including 17 under Ronald Reagan, six under Jimmy Carter and four under Bill Clinton. Congress has raised the debt limit 10 times since 2001. It ain't a partisan issue.

At the same time, there's nothing unconstitutional about the public debt's exceeding the size of the GDP. It's not wise, and we might look like Greece, but it's not unconstitutional. And there's nothing unconstitutional about Congress's trying to impose cuts in the federal budget to decrease the size of the debt or to bargain for cuts in order to vote to raise the ceiling. But if in the end Congress seems intent on allowing the U.S. to default on its debt, the President can assert that that is unconstitutional and take extraordinary measures to avoid it. He can use his Executive power to order the Treasury to produce binding debt instruments that cover all of the U.S.'s obligations around the world. He can sell assets, furlough workers, freeze checks — heck, he could lease Yellowstone Park. And it would all be constitutional.

Source. (http://www.time.com/time/nation/article/0,8599,2079445,00.html#ixzz1RGCqJ2pL) Of course, that entire issue has right wingers and libertarians losing their collective-shit, as though their orientalist interpretation is sola scriptura, or has been historically normative. It's not. But that's another story.

[a-new-machine.livejournal.com]

That article is seriously terrible ConLaw scholarship. "The government also compels us to buy car insurance (if we want to legally drive our car), which is a product from a private company." Seriously? The man is talking about constitutional law, but can't see the difference between state-level regulation of intrastate commerce, and federal-level regulation of intrastate commerce? "George Washington once signed a bill asking Americans to buy a musket and ammunition." Asked, not required.

Seriously, it reads as a propaganda piece.

[yahvah.livejournal.com]

Have I not seen anyone say anything about the absurdity of raising the debt ceiling to service older debt while simultaneously hinging its absolute necessity on a declaration denying naysayers?

[nevermind6794.livejournal.com]

Does the Treasury have the authority to not spend money already budgeted by Congress? I don't see why it would.

[a-new-machine.livejournal.com]

There was an opinion regarding the line-item veto (holding it unconstitutional) that, IIRC, had a majority of justices endorsing a "decline to spend" power on the executive's part. I'm not 100% certain about the contours of that power, though, or the ways in which it can and cannot be permissibly used.