Michael McConnell Weighs In on the Debt Ceiling

When Michael McConnell speaks on constitutional law, people listen, as well they should.  And he says that the argument that the President can unilaterally issue new debt is “bunk,” for basically the same reason that Andrew Grossman said a few days ago: only Congress has that power.  That in and of itself is arguable, but let’s assume it for the sake of argument here. 

Unlike Grossman, however, McConnell has an answer for what the Public Debt Clause means: if the President can’t issue new debt, how can he ensure that the government doesn’t go into default?  Easy, says McConnell: he can make unilateral spending reductions in order to pay off the bondholders:

At most, it means that paying the public debts and pension obligations of the United States, as they become due, has priority over all other spending. Each month, the Treasury takes in about $175 billion in new revenues. These are more than sufficient to pay principal and interest when due, as well as pension obligations…

If we reach the debt limit, the Treasury will be compelled to reduce spending (other than payments on the public debt and pensions) to bring current expenditures in line with current receipts, just as a family has to do when it has maxed out on its credit cards.

This argument isn’t necessarily wrong, but it creates as many problems as it solves.  In Clinton v. New York, the Supreme Court struck down the line-item veto, arguing that the President is not allowed to pick and choose among provisions of a duly enacted piece of budget legislation even if Congress has given him to power to do so.  So what McConnell appears to be arguing is that the President can pick and choose between spending only if Congress has not authorized him to do so, and in fact, by previously passing spending measures, has instructed him to spend it.  That hardly makes sense.

Undoubtedly, McConnell would argue that impounding money is different from vetoing appropriations.  To my mind, this would come perilously close to failing the laugh test.  A President would say, “I’m not vetoing this spending, you understand: I’m just refusing to spend it.”  That’s the sort of thing that gives lawyers a bad name.

The right-wing position now appears to be that the best and least disruptive way to read the Public Debt Clause is to shut down large sections of the Government instead of maintaining the status quo.  Whatever that might be, it certainly isn’t conservative.

UPDATE: Even without Clinton v. New York, McConnell’s recommendation that impoundment can cure the Public Debt Clause has constitutional problems.  Richard Nixon wanted to impound money that Congress had appropriated, but was told by his OLC head that the President lacks the constitutional power to impound funds.  That OLC head was famed bleeding-heart left-winger William H. Rehnquist

Rehnquist did conclude, interestingly enough, that the President might be able to impound funds for national security and foreign affairs.  So the conservative position at this point boils down to massive Defense Department cuts.  Hmmm….

Comments

  1. MobiusKlein says

    If a family has maxed out the credit cards and can’t pay, they declare bankruptcy. Since the US can’t declare bankruptcy, we are stuck.

  2. Graeagle says

    I heard on “Marketplace” a few weeks ago that a 1974 change in federal law eliminated the president’s authority to impound funds. Anyone know whether that’s still the case?

  3. Jonathan Zasloff says

    @Greagle — Yes, that’s right. McConnell argues that the 1974 Act wouldn’t apply here because the Public Debt Clause would trump it. That might be right if impoundment was constitutional to begin with, but I am very skeptical that it is, at least in the way that McConnell wants to use it. His argument seems to be that in order to prevent Presidential overreach, we have to allow the President to take control of the spending power.

  4. Warren Terra says

    McConnell’s idea is that the President can tell the government he runs not to spend money that Congress has told him to spend? Really? Because the potential for abuse there is at least as great as the potential for abuse if he spends money on Congressionally mandated expenses without Congress providing the money. What if he stops the federal government building roads in Republican-controlled Congressional districts, either to save money or because he feels like it? Maybe the next Republican President might feel that Democratic Congressional districts don’t need school lunches. Or just refuses to spend money on Medicaid, because God will look after his own. Does McConnell think that’s hunky-dory?

    How can McConnell claim that a sort of pocket-line-item-veto is Constitutional, given that an actual line-item-veto, created by Act Of Congress, wasn’t Constitutional? And haven’t there been successful lawsuits that forced the US government to spend money and to enforce its own laws (back before the Scalia/Alito court routinely killed such endeavors, mostly by means of specious arguments about standing)?

  5. Brett Bellmore says

    The argument isn’t that the President has a general power to impound funds, but rather, that when placed in a statutory bind such as is generated by a conflict between appropriations laws and the debt ceiling, he has to violate SOME law. Violating appropriations laws by not spending money is the only statutory violation which isn’t also a constitutional violation.

    So this is the only circumstance under which he can impound funds: When he doesn’t have the funds Congress directed him to spend.

  6. NCG says

    Just out of curiosity, why was this debt clause put in the 14th Amendment to begin with? (Or was that covered in a previous post?) Seems like an odd place for it. I thought the 14th Amendment was mostly about civil rights.

  7. Jim Whelan says

    Budgets do not generally give time frames for spending, only that expenditures be made during the fiscal year, so I would surmise that the President would not be “impounding” funds if he only “delays” some expenditures until funds become available (if and when Congress acts). As long as his intention is to eventually make expenditures authorized by Congress, maybe he can do it…

  8. Warren Terra says

    Brett, IANAL, but I’m pretty sure that it’s in the Constitution that the President has to spend money as directed by Congress – by way of the Supreme Court, if not explicitly. So I don’t think I buy the distinction you seem to draw between a Statutory mandate that he spend money and a Constitutional mandate that he cannot find or make more money to spend.

  9. Jonathan Zasloff says

    @Warren Terra — Brett’s argument is McConnell’s. The problem is that Rehnquist — and really, the exact same general separation of powers principles that McConnell cites — would also state that impoundment is unconstitutional. It’s not clear to me why impoundment in the context of an emergency is okay, but borrowing is not. They both violate Congress’ supposedly exclusive spending power — which it doesn’t really have to begin with, but that’s another story.

  10. J. Michael Neal says

    What interests me is how narrowly the term “debt” is being defined to mean only the bondholders. The US government has signed contracts with lots and lots of vendors. In what way does that not constitute a debt? We, including conservatives, talk all the time about entitlement programs (at least the ones that benefit Republican constituencies) as having made promises to their beneficiaries. In what way do those promises, in exchange for years of tax paying, not constitute debts?

    There are many ways that capital receives extraordinary privileges in our legal system. I see no reason to add to them by asserting that only bondholders own the government’s debt.

  11. Jonathan Zasloff says

    @J. Michael Neal: I think that debt would clearly include the vendors — that’s pretty clear in the plain text of the 14th Amendment. (The Amendment includes people owed money for Union war expenses, for example). But I don’t think it would include people who expect to receive Social Security benefits. As McConnell notes, there is precedent saying that benefits recipients don’t count as creditors for contracts clause purposes. And that makes sense. If benefits recipients were holders of “debt,” then that would imply that Congress could never reduce benefits, which I think is clearly wrong as a legal matter, although preferable as policy.

  12. Warren Terra says

    Jonathan,
    Why wouldn’t spending on benefits recipients be just as much a legal mandate as spending on bullets? Congress has passed laws saying the recipients will get defined amounts at defined times – a binding contract, if you will. The obligation is a bit different than with vendors – that bullet manufacturer has a say in how many bullets it will deliver at what price, while Congress defines what benefits payments will be without directly negotiating with anyone else – but both are spending obligations mandated by Congress, and both involve counterparties who’ve been promised payments – people with a debt claim, if you will.

  13. Jonathan Zasloff says

    @Warren — The problem is that legislated benefits aren’t a binding contract. I suppose you could say that precisely because Congress didn’t negotiate with anyone, there is no consideration and so it isn’t a contract, and so there is nothing owed on the contract. Employees who have already put in hours would be creditors as well.

    My view is that Congress does have to pay out some appropriations despite the debt limitation, but not because of the Public Debt Clause; it’s because of statutory intepretation issues. But that’s for another post.

  14. Benny Lava says

    For all the hand wringing that certain right wingers make over expansion of presidential powers they seem quite content to hand over line item veto. Curiouser and curiouser.

  15. Brett Bellmore says

    “It’s not clear to me why impoundment in the context of an emergency is okay, but borrowing is not. “

    Because it’s not a case of “impounding” funds, if you don’t have the funds to spend in the first place.

  16. Warren Terra says

    Brett, I believe (though I could easily be wrong) that the administration has the power to issue treasury bonds, up to the debt limit – and the power not to. By not issuing treasury bonds, in a deficit situation, could the President create a budget shortfall to do as they please? Terminate all benefits to people whose surname and given name both start with “B”, for example?

    I really don’t see how you can imagine that giving the President unlimited power to decide what gets funded is less of a power grab than giving him the authority to scrape up funds to be spent according to Congress’s directives.

  17. bobbyp says

    If I recall correctly, the Supreme Court shot down the idea that ‘impoundment’ was legit (Nixon, see). Further, the president must seek Congressional approval to not spend monies Congress has appropriated. Thus, in this instance, the president would be contravening a Supreme Court ruling by using funds appropriated elsewhere to pay interest or principal on US debt instruments. If he were to legally attempt to cut spending in some areas to “switch” revenues to be dedicated to debt service, he would have to ask Congress whose ox is to be gored. Interesting.

    As for ‘not having the funds to spend in the first place’, could we not ask how is it that Congress, too, can appropriate monies “it does not have”? Chicken….meet egg.

    Also, I’ve read that there is a law that spending in excess of tax revenue has to be funded only by issuance of debt instruments. I should think then, that since Congress has authorized the spending, that issuing more debt pretty much follows…so which one are you going to pick? These requirements seem to simply contradict each other. Frankly, there is currently no need to issue debt. We could just “issue” funds (i.e., spend) but for these silly requirements.

    Really….this whole farce is highly entertaining political theater, but could result in some really disgusting social policy.

  18. bobbyp says

    For all the hand wringing that certain right wingers make over expansion of presidential powers they seem quite content to hand over line item veto. Curiouser and curiouser.

    Agree. Give Obama the line item veto and let the House pass whatever dreck it wants to….watch winger heads explode. Classic, IOKIYAR stuff.

  19. Brett Bellmore says

    “Brett, I believe (though I could easily be wrong) that the administration has the power to issue treasury bonds, up to the debt limit – and the power not to. By not issuing treasury bonds, in a deficit situation, could the President create a budget shortfall to do as they please? Terminate all benefits to people whose surname and given name both start with “B”, for example?”

    Warren, the President has an absolute obligation to obey the Constitution, and, where consistent with this, to execute laws Congress has passed. (In that order, because the Constitution is the highest law of the land.) Occasionally Congress will pass a law, or a set of laws, such that there is no constitutional way to execute the laws, even though the laws themselves may be constitutional.

    In the current context, the power to tax is delegated to Congress, not the executive. The power to borrow is delegated to Congress, not the executive. But Congress has passed laws requiring the President to spend more money than the taxation and borrowing they have authorized will pay for.

    This no more authorizes the President to usurp Congress’ power to tax, or to borrow, than it authorizes him to seize all citizens’ bank accounts, or invade and loot Mexico to fill the shortfall. His obligation to uphold and defend the Constitution absolutely precludes his usurping other branches’ powers, or violating other clauses of the Constitution. (Such as the equal protection clause, in your suggestion.)

    AND, although Congress may have set up a circumstance where it’s impossible for him to enforce every last law, he is still bound generally to enforce laws. That means that, while he may fail to enforce some law or other because Congress has made enforcing them all impossible, he is not freed to chose to violate laws that aren’t impossible to obey, such as deliberately not using all the taxation or borrowing Congress has authorized.

    Really, if he’s going to faithfully carry out the duties of his office, the present circumstances leave him only one option: Avoid default by only spending the money he actually has available to spend. This is pretty obvious unless you’re looking at the situation from a “How can we game this to circumvent the Constitution and transfer as much power from the branch we lost control of to the branch we still control?” perspective.

    Now, he does have considerable discretion, for all that. Many spending bills do not dictate the exact timing of the expenditures, and he can constitutionally defer them for a while. To the extend he can’t spend all the money Congress has ordered, (Again, because he doesn’t HAVE IT, and lacks any constitutional means to get it.) he can pick and chose which spending doesn’t happen.

    He can manage the shortfall to minimize pain, such as saving money by shutting down illegal wars which Congress never authorized.

    Or he can manage it to maximize the pain, such as cutting off pension checks, and blaming this on one party in Congress, though it’s his own decision, and both parties are responsible for the current standoff. I rather expect the latter, it’s traditional at state and local levels, and Obama is just a typical Chicago machine politician given a larger stage.

    What he can’t do is usurp other branches’ powers. Too bad for you, ’cause that’s exactly what you want him to do.

  20. Bernard Yomtov says

    Brett,

    So you are prepared to give the President a line-item veto? Is that right?

    There are complications here. Warren mentions one. What if the budget requires borrowing and the Presdient refuses? Is he then entitled to pick and choose expenditures?

    Suppose you say he is required to borrow, because he must carry out the programs Congress passed and appropriated funds for. But now say doing that requires an increase in the debt ceiling. Congress passes such an increase, but the President vetoes it. Has he given himself a line-item veto?

  21. says

    It seems to me that it’s a pretty thin argument to claim that the president isn’t bound to obey the law requiring the paying out of benefits, but is bound to obey the law telling him not to issue debt to cover already-appropriated expenditures. Oh, and anyone who thinks there’s no consideration involved in social security seems to me to have missed the heading on a rather large chunk of the deductions from their paycheck. (Which is one of the reasons that all proposed changes in social security have a long lead time.)

    But really we all know that this is McConnell throwing a bunch of excrement on the wall to see if he can further derail sensible discussion. Otherwise his paycheck and that of his staff would be the first things deferred.

  22. Lincoln Kennedy says

    @Jonathan Zasloff: Why doesn’t the language, “including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion” control in this case? I understand that the pensions in question are for military service, but “including” doesn’t mean “specifically”, does it? If it did, would that imply that only direct payments to veterans would not be questioned but those payments made to their widows and orphans could be questioned?

    This sort of reminds me of one of the objections to assumption during the early republic, when Madison and others recoiled at the idea that speculators who purchased war service bonds from veterans at a discount would be paid the whole value of the bond. Even though Hamilton is hailed for going through with this plan and creating an investor class, paying all obligations in the simplest way was clearly the best idea.

    The fact of the matter is that the Constitutional option that tries to distinguish who gets paid and who doesn’t causes far more practical and political problems than simply ignoring the limit and continuing business as usual. It doesn’t create a class of any persons who have suffered injury, therefore there should be no one with standing to sue. It doesn’t require the President to pick and choose which laws to fund and which ones not to fund, therefore it doesn’t create any new precedents for Presidential power. It keeps Congress accountable for appropriations. And finally it explodes holding the debt hostage as a political tactic for all time. It is the simplest legal position, the most just, and the most equitable.

  23. Brett Bellmore says

    It’s simply the one that most directly violates the Constitution, by having the President usurp the legislative branch’s constitutionally delegated powers, rather than minimally resolving the current issue . But I can understand not being concerned about that, if you don’t care about obeying the Constitution, dictatorship IS simple…

  24. beowulf says

    Coin seigniorage. Someone in Congress added a handy “cheat code” for just this situation in 1996 by slipping in an amendment to the Coinage Act in the Omnibus Appropriations bill passed right before adjourning for elections.
    “[31 USC 5112](k) The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time”. Earlier (in time and subsection), the Coinage Act states, “(h) The coins issued under this title shall be legal tender”.

    Geithner could order the West Point Mint to strike a 1 oz $1 trillion platinum proof coin and present it to the NY Fed to buy back $1 trillion in Fed-held Treasuries. Arguably seigniorage could be used to create money for Tsy to spend, but let’s keep things simple. A creditor can’t refuse legal tender in payment of existing debt, so whenever Tsy approaches the debt ceiling, the West Point hens crank out more platinum eggs to buy back more T-bonds, freeing up room under the ceiling to issue more Treasuries. Essentially, its a workaround to archaic rules from the old gold standard monetary system, allowing our current (as Jamie Galbraith might say) spreadsheet monetary system work more efficiently. Incidentally, replacing $1 trillion in Treasuries in Fed reserves with the same amount in coins doesn’t add a single dollar to the real economy so its not inflationary. To quote Galbraith:

    “Modern money is a spreadsheet! It works by computer! When government spends or lends, it does so by adding numbers to private bank accounts. When it taxes, it marks those same accounts down. When it borrows, it shifts funds from a demand deposit (called a reserve account) to savings (called a securities account). And that for practical purposes is all there is. The money government spends doesn’t come from anywhere, and it doesn’t cost anything to produce. The government therefore cannot run out.”
    http://www.correntewire.com/fed_money_spreadsheet

  25. says

    Assuming that McConnell’s argument is really for impoundment (though I disagree), it may be so that both “impoundment” and unilateral borrowing by the President would violate Congress’ “supposedly exclusive spending power.” But the latter would also violate the express grant to Congress of the power “to borrow money” in Article I, Section 8. Moreover, the 14th Amendment expressly grants the power to enforce its provisions to Congress, not the executive. So even if you were to establish that impoundment was unconstitutional, this would not support, let alone establish, the existence of a unilateral borrowing authority.

    I question whether McConnell’s argument is properly characterized as “impoundment” any more than default equals impoundment. In either case, there are legal obligations in excess of available funds. But as the amount of available funds is greater than zero, some things — whether appropriations or debt — will get paid, and others will not. As I understand McConnell’s argument, Section 4 (insofar as it is relevant here) would simply authorize (if not require) the President to prioritize the payment of debts over standard appropriations, and that’s not quite the same thing.

    JHA

  26. Benny Lava says

    If I understand Brett’s argument he favors the president having a de facto line item veto rather than issuing debt above the ceiling because, though they would both violate the law, he personally favors reduced spending and this facilitates his goals. And everyone who disagrees is a fascist. Ok, good to know, lolz.

  27. Brett Bellmore says

    Apparently in your case understanding things doesn’t involve reading them. Not spending money appropriated violates a law. Borrowing without Congressional approval violates the Constitution. Contradictory laws make violating a law unavoidable. They don’t provide an excuse for violating the Constitution.

  28. Warren Terra says

    Brett, for the umpteenth time, the Supreme court has ruled that it is unconstitutional for the President to refuse to spend money where Congress has told him to spend it. Your distinction is a false one. The impression that you cling to that distinction because it fits your policy preference of reduced spending is rather inescapable.

  29. Brett Bellmore says

    Warren, for the umpteenth time, Congress has put the President in a position where, eventually anyway, there’s no way for him to not violate one law or another. The law can not require the impossible, so he’s able, in this context, to violate a law. Because he’s not choosing to violate a law, only what law to violate.

    But that inevitability of violating a law does not involve inevitably violating the Constitution, which is what it would require for him to have the same choice with regards to constitutional violations.

  30. Benny Lava says

    Not spending money appropriated violates a the Constitution. Reading is not Brett Bellmore’s strong suit.

    Face it, your argument amounts to calling people who disagree with you Nazis. Pretty pathetic even for you, which is usually pathetic anyways.

  31. Brett Bellmore says

    Except that, reading above, I didn’t call anybody a Nazi?

    Really, Benny, that’s why I really don’t like arguing with you. A good argument can be fun, but when the other person is arguing with some figment in his own head, and not what you say, what’s the point?

    But I’ll play for one more round: Once Congress has passed contradictory statutes, a failure to “see the law faithfully executed” is inevitable. A usurpation of another branch’s constitutional authority is not.

    That, as soon as they lose control of the legislature, Democrats suddenly become advocates of executive usurpation, is not news. It’s just an extension of living constitutionalism: No aspect of the Constitution you find inconvenient can be allowed to stand. Somebody else finding a clause inconvenient, of course, is the rule of law.

    Our Constitution was written to provide for legislative supremacy. This may have problems when the legislature is deadlocked, but that’s the Constitution we have.

  32. Warren Terra says

    Brett, the President picking and choosing which programs to fund is a far more intrusive and extensive usurpation of Congressional authority than is selling more bonds in order to spend money as Congress directed. Every time anyone points this out to you, you ignore it and then follow up by calling Democrats fascists – or, more precisely, “advocates of executive usurpation”. It’s great that you and Antonin Scalia know exactly what the Constitution has always meant, but your weird ideas about what liberals think tell us far more about your pathologies and about reality. As with the anti-gun plots you see hiding under every bedspread, and your longstanding Birtherism, which you defended by arguing that it is literally impossible to prove the existence of an external universe. Very Descartes, very moot.

  33. Benny Lava says

    “Except that, reading above, I didn’t call anybody a Nazi?”

    “But I can understand not being concerned about that, if you don’t care about obeying the Constitution, dictatorship IS simple…”

    So here we see Brett making a veiled reference to Nazis and then denying it.

    “Once Congress has passed contradictory statutes, a failure to “see the law faithfully executed” is inevitable. A usurpation of another branch’s constitutional authority is not.”

    Just because you say this doesn’t make it true, as others have pointed out that choosing which programs to fund is unconstitutional. To deny this is a sad rationalization of your own bias.

    “Really, Benny, that’s why I really don’t like arguing with you”

    Boo hoo! Someone calls you out for your crap nonsense arguments and you get stangry. Didn’t stop you from backpedaling and then making the same sad, obtuse arguments.

  34. Brett Bellmore says

    Right, does the President have an excuse to levy taxes Congress didn’t pass? Confiscate private assets without compensation? Invade Mexico and loot it to make ends meet? Just how much of the Constitution has to be ditched, to make sure no appropriation ever goes unspent?

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