If not the Coin, then what?

If the President is sworn to execute the laws, and can’t obey both the Congress’s command to spend money and the Congress’s limit on borrowing money, and if minting a $1T platinum coin gets him out of that box, doesn’t he have to issue the coin?

Though I somewhat playfully supported the Platinum Coin fix* to the debt-ceiling problem during the last crisis – as the perfect non-solution to a complete non-problem – I’m sympathetic to Kevin Drum’s impatience with the idea.

The Coin may be within the text of the law, but it’s hardly within its spirit, and the national credit of the United States should not depend on legal shenanigans. Much, much better to have the Republicans in Congress grow up and authorize the President to issue debt to pay the bills already incurred, and still being incurred, by Acts of Congress.

Politically, it looks to me as if the Republicans know they have a losing hand – their Wall Street paymasters won’t hold still for default – and are prepared to throw it in, now that the President has said he won’t ransom the hostage. That’s another good reason not to give them an out.

Still, there’s a real question here. The President’s oath of office commits him to “take care that the laws be faithfully executed.” The law commands the President to expend appropriated funds, and gives him no authority either not to expend them or to withhold payment when the bills come in. (Not paying the debt when due is not only a horrible, terrible, awful, no-good idea, it might violate the 14th Amendment to boot.) But the debt ceiling forbids the President to borrow the money required to obey the command that he spend it.

So: if we imagine a situation where the Congress doesn’t lift the debt limit, and the President has to choose between the Coin and default, would default really be the better option? If default is preferred, on what principle should the President choose which bills to pay and which to refuse to pay? And by what authority would he make that choice? If you’re sworn to execute the laws, and your choice is between the Coin and not executing some of the laws, aren’t you pretty much stuck with the Coin?

* For those who haven’t been following, the idea is to take existing legal authority to mint platinum coins in any denomination by the horns and mint a trillion-dollar coin. You then deposit that coin in the Treasury’s account at the Fed, reducing the national debt by $1T. The authority to mint gold bullion coins – which don’t count against the statutory limit on paper currency – requires that they only be issued at their intrinsic value, but somehow that clause got left out of the legislation extending coinage authority to platinum.

Author: Mark Kleiman

Professor of Public Policy at the NYU Marron Institute for Urban Management and editor of the Journal of Drug Policy Analysis. Teaches about the methods of policy analysis about drug abuse control and crime control policy, working out the implications of two principles: that swift and certain sanctions don't have to be severe to be effective, and that well-designed threats usually don't have to be carried out. Books: Drugs and Drug Policy: What Everyone Needs to Know (with Jonathan Caulkins and Angela Hawken) When Brute Force Fails: How to Have Less Crime and Less Punishment (Princeton, 2009; named one of the "books of the year" by The Economist Against Excess: Drug Policy for Results (Basic, 1993) Marijuana: Costs of Abuse, Costs of Control (Greenwood, 1989) UCLA Homepage Curriculum Vitae Contact: Markarkleiman-at-gmail.com

59 thoughts on “If not the Coin, then what?”

  1. “The Coin may be within the text of the law, but it’s hardly within its spirit, and the national credit of the United States should not depend on legal shenanigans. Much, much better to have the Republicans in Congress grow up and authorize the President to issue debt to pay the bills already incurred, and still being incurred, by Acts of Congress.”

    Having a grown-up GOP would be nice, and the only way it’s going to happen is if they repeatedly get spanked, and spanked hard, when they act like brats.

    And f*** the spirit of the law. If the GOP wants us to play by the spirit, they can start doing so themselves.

  2. “But the debt ceiling forbids the President to borrow the money required to obey the command that he spend it.”

    No, it does not. The “debt ceiling” is not a law saying the President may not borrow beyond a certain point, it is not a law limiting the President’s power to borrow. The President has no power to borrow.

    The debt ceiling is a limited delegation of Congress’ power to borrow. In essence, it is a limited line of credit.

    If the President borrows beyond the debt ceiling, he is not violating a statute, as there is no statute prohibiting this. He is violating the Constitution, by usurping a Congressional power. This is the same as though he wages a war Congress didn’t declare, levies a tax Congress didn’t enact, spends money Congress didn’t appropriate.

    There are only three ways out of the debt crisis.

    1. Borrow more money
    2. Levy more taxes
    3. Spend less money.

    Only the third option involves violating statutes, instead of violating the Constitution directly by usurping another branch’s powers. It is thus the least offensive, (From a constitutional perspective.) alternative.

    I know it’s the most offensive to Democratic sensibilities, because the prospect of ever spending less money fills you with horror. But that’s still my analysis.

    1. Brett, the scenario here assumes that Congress cannot reach agreement on raising taxes OR cutting spending.

      So, when you say “Spend less money”, what you really mean is “Give the executive branch the vastly increased power to pick and choose which of Congress’s laws to enforce.”

      Do you really want the Executive Branch to arrogate more power to itself? Doesn’t history show that every assumption of new powers by the Executive Branch becomes permanent?

      Raising the debt limit, or declaring it unconstitutional under the 14th amendment, or circumventing it via stuff like platinum coins etc. represents the least possible expansion of executive power. In those scenarios, the president is saying “I’m not going to overrule any of Congress’s decisions on taxing or spending. I’m just going to ensure that the government does not default on the obligations that Congress has placed on it.”

      If Congress wants to keep the debt below some limit, they can raise taxes or cut spending. The president can’t do either on his own. If you give him the power to start selectively enforcing only some laws, or perhaps only parts of laws, we’ll be on a slippery slope to hell. Remember, the president isn’t going to ask YOU which laws to enforce.

      1. Do you really want the Executive Branch to arrogate more power to itself?

        I think the answer here is that he does, or at least that some Republicans do.

        This is because it absolves the GOP of any responsibility for the damage caused by cuts. Eliminate a defense project that hurts a company in some town? “Hey. Blame Obama.” Social Security check delayed? “Not the Republicans’ fault. Obama’s decision.”

        We saw this at work in the Presidential campaign, as Romney and Ryan talked about limiting tax deductions, but declined to specify any they wanted to cut. We also saw it when they criticized Obama for imaginary cuts to Medicare when Ryan himself has been an advocate of cuts. It’s a trap, and Obama shouldn’t all for it.

        Let the Republicans specify the changes they want, and let them campaign on them. If they can gain control of the Senate, and expand their House majority, in 2014, on the strength of a campaign based on reductions in Medicare and whatever else, let them. The debt limit game is just posturing and chest-pounding, and it’s extremely dangerous.

    2. There is another alternative you don’t seem to have considered. The president probably is required to spend the money because every penny of the spending in the budget has previously been approved by the Congress. Under the Congressional Budget and Impoundment Control Act of 1974 (2 U.S.C. §§ 601-688), the president arguably has no power not to spend money that has been appropriated by the Congress. He is legally required to spend the money as directed by Congress.

      Therefore, does not the president’s obligations under the Budget Impoundment Control Act and his duty to see that the laws are faithfully executed imply an inherent power to take whatever steps are necessary to obtain the money to pay the bills that Congress has run up? I say it does. If Obama also says it does, then he can direct the Treasury to do whatever is necessary to get the money pay for the things Congress has essentially already bought and let the Supreme Court decide.

      (By the way, before any Republicans sneer at this analysis, they’d do well to remember the history of the fights over the impoundment power—which every Congress since Jefferson’s first use of the impoundment power has opposed with all its might, and for good reason. Bear in mind that if the president doesn’t have the duty to spend the money appropriated by Congress, a future president Nancy Pelosi might well decide to end the persistent wealth transfer to the red states by simply impounding money which the Congress has ordered be spent in those states).

      1. I’m inclined to agree. Cut out the platinum coin middleman. Obama just orders Geithner and Bernanke to arrange for the execution of appropriations until such time as Congress raises the debt ceiling consistently with its decisions on taxing and expenditure. If they refuse he fires them à la Nixon and appoints people who will. His justification is the 14th Amendment. He does not have to rule the debt ceiling unconstitutional; he just finds that Congress’ refusal to raise the debt ceiling has created an emergency which requires the President to break one of three laws for a short time, and the debt ceiling one does by far the least harm to the Republic.

    3. Brett: One more time. This is not about how much money gets spent in the future. This is about whether to honor the government’s obligations as they come due. The threat is not to “tear up the national credit card,” it’s to fail to pay the bills. Doesn’t that strike you as a disgraceful thing to do? And note that on your theory the President gets to pick and choose which bills to pay, with no legislative guidance at all. What happened to separation of powers?

    4. So, Brett, would you like to answer my question: precisely which obligations, due by law, should the President refuse to pay?

      1. We can’t fail to pay existing bond holders. We can’t cut anything related to defense. We can’t cut anything for old people, nor corporate welfare, nor anything that negatively affects the senate-controlling majority of sparsely populated rural states (farm subsidies, highway subsidies).

        If Obama tried to stop payment of any obligations to those interests, he’d be impeached before the ink on the White House’s press release was dry.

        So when people talk about wanting the President to deal with the crisis by stopping payments, what they mean is they want him to take away any money that goes to helping children and the poor.

        There are a lot of people out there who just love the idea of taking money away from children and the poor, to give it to the already-rich and already-powerful.

      2. “If default is preferred, on what principle should the President choose which bills to pay and which to refuse to pay?”

        I’ll give my standard answer here. Obviously, we need to pay bond-holders first.

        After that, the Federal government should start terminating contracts with businesses located predominantly in Congressional districts represented by Members of Congress who have either voted against or indicated opposition to raising the limit.

        I believe this charade will end approximately 30 seconds after these termination letters are delivered to the appropriate business people.

    5. Doesn’t this miss the point entirely? The article to which Mr. Bellmore is responding makes a pretty convincing case that there’s an option 4 to put on that list:

      4. Mint a trillion-dollar platinum coin

      Given that, and otherwise accepting Mr. Bellmore’s framework, we have two options that violate the constitution, one option that plainly violates statutes, and one option that violates the spirit but not the letter of a statute. That last one, then, is the last offensive, (From a constitutional perspective.) alternative.

    6. Only the third option involves violating statutes, instead of violating the Constitution directly by usurping another branch’s powers.

      Absolutely, positively wrong. The decision not to spend money appropriated by Congress is just as much an usurpation of its powers as any of the other options. It may be a power that Congress has expressed through statute, but it is unarguably a Congressional power.

      Even you are usually better at presenting an argument than this.

    7. That’s an interesting analysis, Brett. Interesting, and completely wrong.

      It doesn’t make a difference if you put it in italics, bold, or super-double-underline, the debt ceiling is NOT a limited delegation of Congress’s power to borrow. It is a limit on the Treasury’s ability to issue debt in order to make the expenditures that Congress has already mandated.

      And the debt ceiling is a statute; there’s nothing in the Constitution limiting the executive’s ability to borrow money in order to cover Congress’s debts. Borrowing in excess of the debt ceiling would violate a statute, not the Constitution.

    8. There is a 4th option – print money. Which the president has the authority to do – if it’s a platinum coin.

  3. Actually, as I understand it, the only kind of platinum coin the law authorizes minting is a numismatic coin, that is to say, one which is NOT currency. So, while nothing in the law prohibits the administration from having a platinum coin minted, or even putting some absurd number like $1 billion on it, it wouldn’t be legal tender, and by law it’s only value would be the value of the bullion, or what they could get for it selling it to coin collectors.

    1. “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.”

      Not a word about “numismatic.” And “denominations” means that the coins are money. The rule that the coins have to be issued without seignorage – for the value of the bullion, plus production cost – is in the section about gold coins but not (as you can see) in the section about platinum coins. If you disagree, please point to the law that says otherwise.

    2. As Mitch has pointed out, all coins minted under title 31 are legal tender. Platinum coins are no exception (including the currently existing American Eagle Platinum Coins).

      If you want to attack the legality of the scheme, there are two ways in which you could have success, to the best of my understanding.

      One is 31 USC § 5111 (a)(1): “The Secretary of the Treasury shall mint and issue coins described in section 5112 of this title in amounts the Secretary decides are necessary to meet the needs of the United States”. While § 5112 (k) (the platinum coin clause) is pretty unambiguous. “the needs of the United States” is less clear. Prior to the platinum coin debate, most people would have interpreted it as the need of the US for currency used as currency (i.e., coins meant for circulation and numismatic purposes). The argument that it can be interpreted to be a blank check for essentially duplicating the money creation powers of the Fed strains that a bit (though not impossibly so: see the Legal Tender Acts).

      Then, if you do read 31 USC § 5111 (a)(1) as a blank check for money creation, you may consider the nondelegation doctrine, which prevents Congress from handing over any of its powers (such as the power to create coins and setting their value) wholesale to the executive branch. While the nondelegation doctrine has been considered dead by some, the Supreme Court has so far refused to actually bury it. The Supreme Court generally requires an extremely low threshold for the “intelligible principle” of a statute to pass muster, but there is a non-zero threshold (as Cass Sunstein discusses in a 2008 paper), and 31 USC § 5112 (k) leaves absolutely everything to the discretion of the executive.

      That said, there’s sufficient legal uncertainty that the Office of Legal Counsel should be able to write just about any desired opinion for the president (compared to explaining why torture isn’t torture, this isn’t exactly heavy legal lifting). And assuming that you find somebody with standing to bring suit, by the time this would be before the Supreme Court, the platinum coin would have already been printed: At which point the Supreme Court would face the unenviable problem of creating an economic catastrophe if it either declared the minting of the coin contrary to the statute or the statute upon which it relies unconstitutional and likely being blamed for the fallout. (I have a vague, if unrealistic, vision of Donald B. Verilli, Jr., standing before Scalia, flipping a platinum coin in the air, and asking, “Do you feel lucky, punk?”) Also, everything that Ebenezer said below about the reluctance of the Supreme Court to actually adjudicate such a case.

      As a consequence, I think it pretty much comes down to what Obama thinks about the law. And I honestly have no idea what his interpretation would be.

      1. As a consequence, I think it pretty much comes down to what Obama thinks about the law. And I honestly have no idea what his interpretation would be.

        I agree with the first sentence. As for the second, I think this would be absolutely, totally, utterly out of character for him.

        1. I agree that under normal circumstances, I would also be extremely doubtful that he would authorize a scheme with such dubious legality. On the other hand, I’m really not sure what he would do if it literally came down to either (1) minting a $1 trillion platinum coin or (2) sending the US into an economic black hole.

          1. Where “sending the US into an economic black hole” = “cutting spending even a little”.

            You do recall that current spending levels are due to emergency economic stimulus, right? That the recession was 4 years ago? At some point, emergency stimulus spending has to end.

            That’s the sticking point for the Republicans: That the debt ceiling is going to be raised is a given, but they want at least SOME spending cuts to be involved, and not theoretical cuts a decade from now, to be predictably canceled before they take place. Not cuts to projected increases. Cuts.

            I understand liberals typically want the federal government spending a larger portion of the GDP than conservatives do. But insisting on getting the ENTIRE stimulus package converted into a new baseline for federal spending? And calling it a “hostage” crisis if you don’t get all of it?

            No, let’s have the sequester, it would make a nice starting point from which further cuts could be negotiated. I’m getting kind of tired of liberals threatening to crash the economy and ruin our credit rating if they can’t get everything they want.

          2. I’m not sure if you fully understand what hitting the debt ceiling would mean. It is not “cutting spending even a little”. Nobody would be stressing out over that. The problem is that hitting the debt ceiling would put keeping the country running at risk, with potentially catastrophic results.

            By the time the debt ceiling is actually hit, the Treasury will already have gone through all possible measures to delay the government defaulting on its obligations. Once the Treasury is out of options, you start having a cashflow problem, because you have to operate with very little cash on hand and payments occur in chunks that are mismatched with cash inflow. This may, e.g., result in Social Security payments being delayed (or missed entirely), because the money is needed to pay interest.

            Even disregarding these cashflow issues, spending would have to be cut by 40%. This is not “a little”.

            For further details, see the play-by-play analysis by the Bipartisan Policy Center.

          3. Brett,

            In 2009, spending was 25% of GDP. It has been down to 24% the last couple of years, and is projected to drift down to the 22-23% area over the next few years. This is Reagan-Bush 1 territory.

            By the way, I had trouble posting a reply to a previous comment of yours, but your twin claims then that spending compares unfavorably to WWII levels, and that federal revenues have been relatively stable at 19% under a variety of tax regimes are both factually incorrect. From 1943-45 spending was in excess of 40% of GDP. It was 24.3% in 1942 and 24.8% in 1946. And since 2002 (what happened then, I wonder) have been well below 19%, and have been only 15-16% under Obama.

      2. The nondelegation argument is a nonstarter. Congress has always delegated coinage since 1787 and only an idiot would read the Constitution to mean that Congress has to mint the coins itself.

        1. I actually happen to agree with you on the merits and the Rehnquist court’s very, very restrictive reading of standing means that it doesn’t really matter even if Katja is right since there is nobody on the planet with standing to sue. However, since Katja and I have already had this discussion elsewhere and at some length, I will try anticipate her reply to you. I believe her argument on non-delegation is that Congress can’t just delegate unlimited, unconstrained control of the public fisc to the executive by allowing it to print as much money as it wanted, whenever it wanted. Her reading of the law is that the non-delegation clause requires that Congressional grants of authority must be accompanied explicit guidelines and limits on executive discretion in implementing the wishes of the Congress.

          Here, the Congressional delegation is total since the coin can be minted in whatever face value the executive branch wants and there’s no limit to the number of coins that can be minted. Indeed, she might argue that since coinage doesn’t count against the total money supply that can be in circulation, Congress has impermissibly delegated the whole of its authority over the nation’s money and money supply even though that power explicitly belongs to Congress under the Constitution.

          Anyway, that’s how I think Katja would answer you.

          1. That’s really just making stuff up though. If you are going to make a nondelegation argument, it has to be based on some structural concept WITHIN THE CONSTITUTION. For instance, that Congress has given so little guidance to a regulatory agency that its rules would violate due process by failing to provide fair notice or safeguards against arbitrary action. (That’s the nondelegation case against FDR’s national recovery act, which Justice Cardozo found compelling.)

            The coinage power has always been delegated to the US Mint and Congress has not usually controlled the amount of money minted. That’s basically been an executive branch function throughout our history. It’s certainly true under the statutes the framers adopted.

            Further, control of the money supply has been delegated to an INDEPENDENT AGENCY, the Federal Reserve, for 100 years and that delegation has been repeatedly upheld as constitutional.

            So basically, something Congress has done since forever, and which is in fact the only way to run the railroad (because it is absolutely stupid to have Congress directly control monetary policy) is unconstitutional? I’m sorry, that’s completely idiotic.

            Conservatives seem to have a real tendency to argue that anything they disfavor or that a liberal proposes to do is unconstitutional. It’s a terrible, dishonest, anti-intellectual habit. And it really has to stop.

          2. Dilan, the Supreme Court still holds that there must be some “intelligible principle” that guides the executive (most recently affirmed in Whitman v. American Trucking Associations, Inc. (“In the history of the Court we have found the requisite ‘intelligible principle’ lacking in only two statutes, one of which provided literally no guidance for the exercise of discretion, and the other of which conferred authority to regulate the entire economy on the basis of no more precise a standard than stimulating the economy by assuring ‘fair competition.'”). This “intelligible principle” can be extremely broad and vague, but not nonexistent (see above). And 31 USC § 5112 (k) leaves literally everything up to the discretion of the Secretary of the Treasury (unless you construe 31 USC 5111 (a)(1) as a limiting factor, but then you’d also make the $1 trillion coin impossible).

            This has nothing to do with authorizing the Treasury to coin money, which of course is totally unobjectionable. Nor am I saying that Congress has to control the amount of money minted for any given type of coins (which it does not for regular coins) or even the denomination (which it doesn’t for currency notes). Just that there has to be something more than “do whatever you will”.

            Also, in what bizarro world am I a conservative?

  4. Per an interesting segment on Ezra Klein’s sub for Lawrence O’Donnell last night, it seems that the notion of paying some bills and not others is probably technically impossible. About 30 million payments are made a month, by computers. The software does not support picking and choosing payees and it would be technically infeasible to develop that. It’s not a person deciding to put off the phone bill for a month. The damage would be done anyway — anybody not being paid as scheduled creates doubt about the credibility of the US Government, which means the creditor wants a higher interest.

    I personally think that if the US government owed me money, I would be comforted by President Obama taking the bold, weird, confrontative, possibly illegal, certainly impeachable step of minting up a crazy coin (preferably with Ronald Reagan’s mug on it) in order to pay me what the US government owes me on time and in full. I would be even more confident if he did it today. It would make me a lot more confident that watching some midnight deadline perils of Pauline negotiating drama with a CNN clock ticking down in the corner of the screen.

  5. Mark, I think it’s marvelous that you and Kevin both want a pony for Christmas– and at your ages! The rest of us are just wishing for a non-collapse of the economy.

  6. Mark,
    When did using or applying technicalities in the way the law is written become illegitimate? I don’t remember that ever being claimed before — does it only apply to democrats?

    1. I think the idea here is that Democrats are adults while Republicans are basically tantrum-prone toddlers. Generally, we expect a higher standard of behavior from adults.

  7. 1. As many of commenters, both here and elsewhere, have pointed out, statutory interpretation, these days, is WSYWIG. Modern courts hate legal spiritualism, at least at the federal level. This owes largely to Justice Scalia, who has persuaded most judges (left and right) that where the text of the statute is clear, further inquiry stops.
    2. If this isn’t enough, courts hate–just hate!–to get involved in an intrabranch dispute. They will do almost anything to avoid reviewing this pup: standing, justiciability, or the kitchen sink.
    3. Legal tender has nothing to do with the value of a coin. Legal tender is a very technical branch of contract law–it merely means that a rejection of the tender will discharge the debt and replace it with an equivalent debt. (This isn’t meaningless–let’s say that you have to pay on a contract by a certain date or you can’t renew the contract on favorable terms. If you make a timely legal tender, and the counterparty rejects, you still owe it money, but you have paid on time for purpose of your renewal rights.) Corbin on Contracts is a good place to look.
    4. Yes, folks, law is a technical subject. That’s why they pay lawyers money.

    1. If this isn’t enough, courts hate–just hate!–to get involved in an intrabranch dispute. They will do almost anything to avoid reviewing this pup: standing, justiciability, or the kitchen sink.

      Doesn’t Bush v. Gore show that the Court will, basically, get involved in whatever it feels like? And try to hamstring future Courts to prevent them from using its overstepped boundaries as precedent?

      1. That’s true but there’s really nothing to be done about it. Nevertheless, Ebenezer is right that the Court has historically gone out of its way to dodge such disputes. There’s a whole slew of “prudential” doctrines like the “political questions” doctrine that the Court has used to avoid, well, political questions. One of the things many lawyers and academics found so shocking about Bush v. Gore was how the Court went out of its way to jump into the case instead of letting it work itself through the normal processes or at the state level which would have been the traditional approach.

        Obviously, the Court can do anything it wants and there’s not a hell of a lot we can do about it at the moment. The political momentum does seem to be in favor of caution. I think Katja’s analysis was particularly good on this point when she said that “the Supreme Court would face the unenviable problem of creating an economic catastrophe if it either declared the minting of the coin contrary to the statute or the statute upon which it relies unconstitutional and likely being blamed for the fallout.” Roberts had his shot at Obama’s signature achievement and seems to have just lost his nerve. I don’t see him have the balls to pull the trigger this time.

  8. It’s better long-term strategy to repudiate the ceiling outright rather than issue $1T coins. There’s nothing stopping a future GOP congress from closing the platinum loophole by statute and returning to debt ceiling hostage taking whenever they have control over the house or senate. Repudiating the limit as unconstitutional disarms the threat permanently.

  9. Ooops, I meant “interbranch dispute.” I should also have added that various forms of national currency in the past were not legal tender.

  10. I think what Brett was saying is that numismatic coins are not currency even if they are produced by the government’s mint and therefore couldn’t be deposited with the Federal Reserve. From the little I remember from Commercial Paper, the Federal Reserve can’t accept anything as a deposit except currency defined as legal tender under Sec. 5103. My understanding is that anything that doesn’t qualify under Sec. 5103 can only be used as collateral, which in this case would be limited to the market value of the platinum in the coin. Because 31 USC §5112(h) says that such coins would be fiat money under 31 U.S.C. §5103, the coin could therefore be deposited with the Federal Reserve and the government’s account would be credited with the face value of the coin (in this case, $1 trillion).

    In any case, I believe the question would be of purely academic interest because the Rehnquist court more or less defined the concept of standing so narrowly that it is very unlikely that any court neutrally applying the doctrine would find anybody with standing to bring suit against the Secretary of the Treasury if he minted the $1 trillion platinum coin or the Federal Reserve if it chose to credit the government’s account with the face value of the coin. Similarly, if Obama declared that the 14th amendment rendered the “debt ceiling” unconstitutional, it’s very unlikely that anyone would have standing to sue, not even the Congress or a group of Congressmen. It’s a slightly closer case if Obama used the Budget Impoundment Control Act because the impoundment power has already been the subject of prior USSC litigation so the prudential considerations you mention might not have quite so much force and it would be difficult to deny Congressmen the standing they once enjoyed on the question. But neither constitutional law nor banking law are my strong suits and what I’m saying is mainly based on vaguely remembered lessons from twenty or thirty years ago. I would be very much interested in hearing from anyone with a good background in either area.

    1. According to what Ezra Klein has here (interview with Philip Diehl, former director of the US Mint and Treasury chief of staff under Bill Clinton), the legal tender aspect should not be a problem.

  11. If treasury minted a platinum trillion dollar coin you would be able to hear the howls from the usual suspects all the way to the moon. If Obama were to take that tack he had better get well out in front of it.
    The coin option just don’t sound like the prez we have all come to know and love. Fourteenth amendment seems more his style but even that will turn his guts inside out. It’s going to be a wild fight if congress doesn’t fold this thing up. My hopes are not high.

    1. Yes, exactly.

      I think his first instinct will be to try to compromise. His second and third options would be to either go the 14th amendment route or start issuing California-style IOUs (can’t say which he’d prefer). Minting trillion-dollar coins via a loophole in an obscure law would be pretty far down on his list of options, far enough that I don’t think we’d ever get there.

  12. The President says he’s unwilling to negotiate the debt ceiling, just like he said he was unwilling to negotiate the Bush tax cuts for people making more than $250K. Who here thinks he’s really, truly, unwilling to negotiate this time?

    1. I don’t disagree with you. I think what has been pointed out here is not what Obama is likely to do but rather what he could do if he so chose. He clearly has two method of simply taking the deb ceiling off the table. He can mint the coin or he can simply declare that the 14th amendment is in conflict with the “debt ceiling” and he will follow the requirements of the constitutional. In either case, his decision is simply not subject to court review under current law and there’s nothing the Republicans can do about it short of impeaching him (which they would already have done anyway if they thought they could get away with it).

      Personally, I think Obama will negotiate on the debt ceiling but he’ll fold it into the negotiations about the budget sequester so it won’t make him look quite so weak. Of course, his ability to do that will depend entirely on the willingness of the Republicans to give him political cover which suggests that he’s going to have to pay a steep price for that fig leaf. As Donald Rumsfeld might say, it’s an unfortunate situation but you are represented in negotiations by the president you have, not the president you would prefer or want to have in an ideal world. C’est la vie.

  13. The problem with the 14th amendment route is that a court can stop it. There will be a bunch of 13 week treasury bills mature on 2/14. So Treasury will conduct an auction to replace them. If Treasury announces that it will auction more bills than it replaces, thus violating the debt limit, someone can go to court and seek an injunction. There’s a significant chance that a preliminary injunction might be granted. If it is, then default still looms. Worse, the debt limit warriors on the Hill are encouraged.

    A court can’t prevent minting a platinum coin. Shortly after midnight on 2/20 the social security computers are programmed to issue EFTs to the bank accounts of approximately a third of social security recipients. If on 2/19 it becomes clear that there won’t be enough funds in the bank to cover those EFTs, Treasury can mint a coin and deposit it at the Fed. The Fed will credit its account and then the EFTs will go through. By the time someone gets into court, it’s a fait accompli. What is an opponent going to ask the court to do? Invalidate the coin, cancel the deposit and order the claw back of the social security payments? Even Ted Cruz would think twice about the optics of such a move.

    Threatening minting the coin is counterproductive. It gives the debt ceiling warriors an out. But if push comes to shove, actually minting it works.

    1. I don’t see how anyone would have standing to go to court in the first place. I also have some doubt about whether the Republicans would allow one of their judges to issue such an injunction even assuming that the Declaratory Judgment Act (28 U.S.C. § 2201) would permit a court to basically order the executive branch to cease operations (except possibly for those activities the court would deem “essential,” which determination would itself plunge the judicial branch right into the political thicket it generally prefers to avoid.

      1. The phrase ‘whether the Republicans would allow one of their judges to issue such an injunction’ strikes this lawyer as extraordinary. Who do you think, e.g., Reggie Walton takes his instructions from? Or Royce Lamberth, to pick another? Or, when the injunction is appealed, Janice R. Brown? Say what you will about the biases and proclivities of these three, or most any of their colleagues, but deferring to the ex parte direction of John Boehner, or Mitch McConnell (and by the way, isn’t that who would be seeking the injunction??) are not among them.

        1. Clearly we differ on what’s extraordinary. I found the Court’s conduct in Bush v. Gore to be among the most extraordinary acts of naked partisanship in the country’s history. Particularly in view of the many comments by several Republican justices immediately before the election and during the period when the case was pending before themselves and the Florida Supreme Court. These remarks left absolutely no doubt that these justices saw themselves as political actors with a strong allegiance to the Republican Party. Bush v. Gore has permanently colored my view of the judiciary branch and left me with the unshakable belief that the Court is now simply another political branch of the government which the Republicans seek to control and dominate through the placement of party loyalists as justices.

          There have also been many remarks by judges of the lower federal courts to suggest that they, too, consider themselves to be political actors with a primary allegiance to an ideology and a political party. The modern Republican Party, like movement conservatism generally, has transformed itself into a mirror image of the Communist Party with its ridged party discipline and lockstep adherence to the party line. You can see this in the the “wingnut welfare” system. The Party has made it quite clear judicial advancement and economic benefits are open only to those willing to toe the party line. This includes many judges who understand that their continued obedience to the party line is essential to future advancement—and Janice Brown is certainly one such judge, as her public statements while on the bench in California amply demonstrate).

          As to where certain Republican judges receive their orders, we know from information that came out during Bush v. Gore that more than a few Republican judges continued to socialize and engage in political discussions with their fellow Republicans, including with Dick Cheney. Many have close family members who are deeply involved in Republican politics, even a few who work directly for organs of the party itself. Many Republicans on the federal bench have made it clear in their public speeches and their decisions that the are deeply committed to movement conservatism and should be considered suspect as such ideological commitment is inconsistent with the exercise of judicial temperament.

          So, yes, I do think that there are a many judges who consider themselves Republican partisans and several happen to be on the Supreme Court. Now, do I think that John Boehner or Mitch McConnell picks up the phone and gives these Republican judges their marching orders? No, probably not. But a wink is as good as a nod.

          1. I yield to no one in my disdain for Bush v. Gore, and will ‘get over it’ 30 years after the conservatives get over Roe v Wade. Nonetheless, I think it is a very unique situation, and not at all representative of how our system works, even in high stakes political cases.

    2. Not counterproductive at all. As Dr. Strangelove once remarked, a secret doomsday device is only an effective deterrent if everyone knows about it.

  14. By the way, if Geithner does resign at the end of this month as he’s said he will and Lew is not yet confirmed by the time the Treasury runs out of tricks, who would be acting Treasury Secretary, formally making the decision?

    1. I’ll step up for a one-month gig. My fee is $10 million, payable up front in Switzerland, plus a pre-emptive pardon signed by the President and a promise from Warren Buffett or similar to pay my legal fees for life. I’ll mint the coin, transport it to the Fed, and wave a gun at Ben Bernanke if he jibs at the deposit. Cheap at the price I’d say.

  15. I’m beginning to think Brett is an automated conservative media aggregator…an algorithm designed to keep the rest of us refuting and addressing an endless stream of false arguments.

  16. I wouldn’t mind the platinum coin option at all, since it would be such a joy to listen to all the howls about how the law doesn’t really mean what it says, but I doubt Obama would do it.

    I do think he should, and might, simply ignore the limit and issue whatever debt is needed. One thing worth noting is that that interferes less with Congress’ powers than any of the other options. When Boehner and others object he can basically say, “You should have thought of that, when you instructed me to spend money on various things.”

    There is also a Constitutional question in my mind that is unrelated to the 14th Amendment. How does Congress have the power to pass laws that contradict each other? That seems unconstitutional on its face.

    A secondary question is whether Congress has the authority to withhold funds needed by the other branches to carry out their duties. Can Congress simply refuse to fund the Supreme Court, or to pay salaries to the President’s staff?

  17. Hmm. I wonder if Obama should float the impoundment option (especially the targeted version) fairly loudly and fairly soon. Soon enough, in particular, to give the House leadership time to file for an injunction forbidding impoundment (which the administration would not oppose). In general, courts do not look politely on suits aimed at stopping someone from doing what the plaintiff has just asked the court to order them to do.

Comments are closed.