The Debt Ceiling and the 14th Amendment: Everybody Wins!

Some observers, including Garrett Epps, who is a legal scholar, and Bruce Bartlett, who is not, have argued that Section 4 of the 14th Amendment makes the debt ceiling invalid.  That Section reads, in relevant part:

The validity of the public debt of the United States, authorized by law…shall not be questioned.

That’s it, at least for the relevant parts.  The only Supreme Court case law on it concerned whether government could renege on debts it made (no), and thus whether it applies to non-Civil War debts (yes).

So what’s the argument here?  Recall that if there a conflict between statutes, the standard method of resolution is the “last-in-time” rule, i.e. whichever statute was passed more recently wins.  The argument is that if Congress approves appropriations after the enactment of a debt ceiling, then it is unconstitutional to refuse to spend money for those appropriations.  And the Treasury can’t issue T-bills and then refuse to make good on them.  Those are decent arguments, although hardly sure-fire winners.  The weakest link in the chain is entitlements, in other words, Medicare and Social Security.  Congress enacted those before it enacted the debt ceiling (2006 IIRC), so those might not fall under this interpretation.  As I have argued previously, whatever the merits of the claim, it may be that the only body with the authority to challenge a President making the claim would be a Congressional joint resolution, which would be blocked by Senate Democrats.

But here’s the kicker: whatever the legal merits of the 14th Amendment claim, its political virtues are overwhelming.  Think about it from John Boehner’s perspective: if he agrees to increase the debt ceiling without significant Medicare cuts from Obama, he’s toast.  But if he doesn’t agree to do that, Wall Street and GOP contributors go nuts.  What’s he going to do?

And consider it from Obama’s perspective: if he agrees to significant Medicare cuts, he’s toast.  But if he doesn’t, and the nation defaults, then the economy goes nuts and his re-election is imperilled.

Now, what if Obama does as Epps suggests and just issues more debt?  It’s perfect from his perspective: he doesn’t cave, pleasing his base (and anyone who cares about good policy), while ensuring that there is no default.

But it is also perfect from the Republican leadership’s perspective.  They don’t cave; they don’t increase the debt ceiling; and they can rail against Presidential imperialism, Obama’s socialist-Muslim dictatorship, etc.  And if I am right about standing, no one ever has to bring this to a head because no one has standing to sue!

What about on policy grounds?  That’s also a winner: the United States is the only develoepd country that requires a legislative vote for this.  No problem there.

Perhaps the only loser is the Constitution.  But even that’s not for sure, and since Bush v. Gore, Republicans certainly have no basis for complaining about that.  Besides, playing games with Constitutional text to escape political crises is as old as the Republic itself.  As Congressmember Timothy Campbell once asked of President Cleveland, “What’s a Constitution among friends?”

Author: Jonathan Zasloff

Jonathan Zasloff teaches Torts, Land Use, Environmental Law, Comparative Urban Planning Law, Legal History, and Public Policy Clinic - Land Use, the Environment and Local Government. He grew up and still lives in the San Fernando Valley, about which he remains immensely proud (to the mystification of his friends and colleagues). After graduating from Yale Law School, and while clerking for a federal appeals court judge in Boston, he decided to return to Los Angeles shortly after the January 1994 Northridge earthquake, reasoning that he would gladly risk tremors in order to avoid the average New England wind chill temperature of negative 55 degrees. Professor Zasloff has a keen interest in world politics; he holds a PhD in the history of American foreign policy from Harvard and an M.Phil. in International Relations from Cambridge University. Much of his recent work concerns the influence of lawyers and legalism in US external relations, and has published articles on these subjects in the New York University Law Review and the Yale Law Journal. More generally, his recent interests focus on the response of public institutions to social problems, and the role of ideology in framing policy responses. Professor Zasloff has long been active in state and local politics and policy. He recently co-authored an article discussing the relationship of Proposition 13 (California's landmark tax limitation initiative) and school finance reform, and served for several years as a senior policy advisor to the Speaker of California Assembly. His practice background reflects these interests: for two years, he represented welfare recipients attempting to obtain child care benefits and microbusinesses in low income areas. He then practiced for two more years at one of Los Angeles' leading public interest environmental and land use firms, challenging poorly planned development and working to expand the network of the city's urban park system. He currently serves as a member of the boards of the Santa Monica Mountains Conservancy (a state agency charged with purchasing and protecting open space), the Los Angeles Center for Law and Justice (the leading legal service firm for low-income clients in east Los Angeles), and Friends of Israel's Environment. Professor Zasloff's other major activity consists in explaining the Triangle Offense to his very patient wife, Kathy.

29 thoughts on “The Debt Ceiling and the 14th Amendment: Everybody Wins!”

  1. I still say platinum coins is the best way to go. Your plan will do in a pinch, but it gives Boehner a win, which I would prefer to avoid. If Obama opts to issue platinum coins, he can continue spending with no new debt issuance. That makes Boehner’s right flank freak out about inflation. It’s also probably a bit more stimulative to the economy. And Republicans and the financial sector will be freaking out to eliminate the Treasury’s unrestricted printing authority–which most of them don’t realize Geithner currently has. Obama can use that as a negotiating chip on future budgets.

    Minting Obamacoins (I say put Boehner on the coin to deflect that) opens Obama to imperial presidency attacks, but as you said ignoring the debt limit does that too. However, as I said the move would anger the financial sector because it would cut of Treasury supply and cause some to worry about sound money. Fealty to finance alone would probably prevent Obama/Geithner from considering it.

  2. Thanks for clarifying how this clause might be interpreted. I wish I could agree on the substance, but I have to admit I find it hard to do, and it seems to me that the biggest winner if Obama goes that route would be Boehner. All his problems would be over at a stroke.

    Whatever Obama does to save Wall Street he won’t win any friends there, so they’re a non-factor. Right now the gop juice is with the tea party crowd. Now, it happens that the teapers have been looking hard to find energy to keep up their hating on Obama and to get others to agree with them. They had people with them last fall by harping on medicare and deficits, then lost them recently with release of the birth certificate, Osama, and Ryan’s medicare.

    If Obama just disregarded the debt limit, unless he explained it supernaturally well, I think it would feel to most middle-of-the-roaders like big-time over-reach, especially since Obama has up to now been playing along with teapers on the gravity of the issue. He’s given himself no cover for reversing his field like that. It would look like arbitrary power.

    And what would the teapers do to capitalize on it? Impeachment. Their ilk has done it once before. Of course the senate would never convict, but impeachment would energize the teapers politically, Boehner couldn’t dare resist them, the party could dodge all the other hard issues “until they get majorities in both houses again” and either defeat or weaken Obama in 2012. It would surely be timed to peak around late spring or summer, just in time to set up the election. And his administration would be tied up in knots until then.

    The way I see this playing out, if Obama now decides to disregard the debt ceiling, whatever the legalities of it, it’d be Boehner’s dream of heaven. Michelle Bachmann’s, too. Remember, these guys know no bounds or rules; they’re truly the children of Gingrich and Rove. Nothing else could be used to unite the gop more effectively. So I’m afraid I think he needs another trick to pull out of his hat.

  3. Why is Obama toast if he and the Republicans fix Medicare so that it does not become insolvent in the near future?

  4. I think Altoid has it. The screaming would be enormous, and you just know the crowd of “2nd-amendment remedy” types would be all over the place.

    You’re also assuming that no court (including the current supremes) would grant standing for a challenge. We could end up with a Roberts budget…

  5. I don’t see how the Constitution ends up losing, unless the 14th Amendment is not invoked at all. It may end up like the war powers provisions of the Constitution, ignored when politically convenient. Presidents get to wage their own wars, and Congressional minorities get to default on the national debt, the Constitution notwithstanding.

    The right thing for Democrats to do on the debt ceiling—and I don’t think for a second they’ll do it—is to go on offense, and challenge the invented “debt crisis,” and promise to repeal the debt ceiling altogether.

  6. If there’s a default, it won’t be a minority in Congress engineering it, it will be the President himself. He has too many other ways of coping with a temporary end to increased borrowing, for default to be somebody else’s fault.

    The problem for Democrats is that this is widely enough understood that this 14th amendment rhetoric isn’t going to get any traction.

  7. All my reading on this verifies this Zasloff statement: But if he doesn’t agree to [raise the ceiling], Wall Street and GOP contributors go nuts.

    My take away is that not raising the debt will hurt the Banksters more than the common slob scrounging coin on Main Street.
    So if the Republicans want to run with that, by all means, let them put the shiv in deep and twist it round…

    Wall Street has proven itself above the law…
    If not raising the ceiling makes me a little poorer but makes Wall Street a lot poorer, I’m good with that.
    In fact hand me the shiv…I’ll file to a fine edge and hand it back to Boehner: Stick the pigs baby. Stick em!

  8. Someone has told the Democratic members of Congress that they’re expected to work on creating a budget every year, yes?

  9. I think the debt ceiling is unconstitutional for a simpler reason.

    Congress has ordered the President to spend certain moneys, and has ordered to President to collect certain taxes. Those two policies determine the debt.

    Having done those two things, which are both express powers of Congress under the Constitution, Congress can’t purport to pass a law that prevents the President from carrying out his duty to faithfully execute Congress’ taxation and spending laws.

    I don’t tend to think that very many laws violate the Take Care clause, but the debt ceiling clearly does.

  10. Iagree with the argument but somehos Idon’t think Obama has in in him to say that Congress has no clothes here.

    My plan B is taken from the procedure of the Inquisition. Suspects were “shown the instruments” of torture and given a chance to repent before they were subjected to the real thing. So Geithner should draft perfectly serious regulations and letters prescribing exactly what emergency cuts in spending will be made, zip code by zip code, congerssional district by congressional district, and mail them to each congressman.

    I get the impression that the GOP reps simply do not understand the possible consequences of their crazy brinkmanship: an immediate one-third cut in all federal spending, including defence, Medicare, Social Security, and debt interest. If you protect one category, say debt or the serving military, you have to cut the others more.

  11. Congress has ordered the President to spend certain monies. With the schedule on which they are spent being, in many cases, subject to discretion.

    Congress has authorized the President to spend other monies. The difference between authorizing and mandating spending not being academic.

    This is not to say that, eventually, the statutory spending mandates won’t come into direct conflict with the debt ceiling. It IS to say that the President can, without violating the law, put that moment off for quite some time. As demonstrated by the fact that we didn’t default last week…

    You can rave all you like, if the President carries through on a default, or violates the debt ceiling law in the near future, it won’t be because he was forced to. It will be because he wanted to.

    And, frankly, if I were thinking of loaning the President money over the debt ceiling, I’d be sweating bullets after reading the 14th;

    “The validity of the public debt of the United States, authorized by law“; Anything Obama borrows beyond the debt ceiling won’t be authorized by law, and it would be perfectly constitutional for him to stiff anybody foolish enough to loan it to him.

  12. Would someone please explain to Brett the provisions of the Congressional Budget and Impoundment Control Act of 1974? Here, I’ll get the ball rolling: the President is not, in fact, legally allowed not to spend funds that Congress has appropriated.

  13. Hey, anyone remember when Brett used to argue that the Constitution be followed to the letter? Now suddenly the letter is to be ignored because it “isn’t going to get any traction”. Good times.

  14. Brett, there’s a difference between the President having some room to postpone default (as is happening now) and the President being able to postpone default indefinitely (which is what you seem to be suggesting).

    The Treasury has shared its estimate of when that room runs out: August 2nd. Do you agree that if no debt ceiling deal is reached by some (currently unknown) on or around August 2nd that there will be a forced default? If not, what is your basis for doubting the Treasury’s estimate?

  15. No, I’m not suggesting he can pospone it forever. Just that default is not imminent.

    And at the point where the money really runs out, he still is not force to *default*. He will have three options:

    1. Default. This option is directly prohibited by the Constitution.

    2. Violate a law mandating spending some money. This option is indirectly prohibited by the “take care” clause.

    3. Violate a law mandating that the debt not increase. This option is indirectly prohibited by the exact same clause.

    So, at that point, when he has genuinely exhausted all other options, (And he is NOT reducing spending by nearly as much as he has authority to do, let us be clear. August is the deadline with that illegal war being continued, and it ain’t cheap. He has a number of lesser options for reducing spending that he’s blowing off, too.) he’s going to have to violate a law. At that point, and no sooner, he will have a solid argument for blowing past the debt ceiling. And a no less solid argument for not spending money he doesn’t have, though I suspect that’s not an option he’s giving any serious consideration to…

    If, at that point, and no sooner he resorts to option 2 or 3, I’ll put the blame on Congress. BOTH SIDES in Congress, since, as I’ve observed, a game of chicken doesn’t exist without two players.

    If he picks option 1, it will have been his own choice, Congress will in no way have forced it on him.

  16. Though I don’t know why I bothered with the above, Ravi, as it just recaps my comment of 4:50 which you apparently ignored.

  17. Actually, your comment was clarifying. You have fundamental disagreements with the Treasury analysis of what spending is and isn’t required. I disagree with you, but now I better understand why:

    1. As mentioned above, I think you’re not taking into account the impact of the Impoundment Act of 1974.

    2. Most (if not all) of the other options you mention are defaults-by-another-name.

    For instance, whether I approve our current set of military operations or not (and I mostly don’t), I think letting the debt ceiling interfere with ongoing military operations would have the same impact on the markets as a default. In any scenario like that, the “full faith and credit of the United States” will have been irreparably damaged and there is no getting around that.

  18. Blowing past the debt ceiling is not a default. Refraining from spending money authorized is not a default. Ending an illegal war is not a default. Only failing to pay the nation’s debts is default. Only option 1. Only defaulting is default.

    Bottom line: No crisis for months, and default only happens if the President wants us to default in defiance of his oath of office. He can argue that options 2 or 3 are not violations of that oath, as faced with contradictory laws he MUST violate one or another of them. But default? That’s a direct violation of the Constitution.

  19. I agree default is unconstitutional, and I agree default can be put off for months with fiddly cash management. But newsouthzach and Ravi are quite right to point out that that Presidential impoundment of funds a la Nixon is illegal. You are asserting the President has what amounts to a line-item veto on spending bills, after they become law, whenever we approach the debt limit. That’s precisely what the Impoundment Act was designed to prevent.

  20. That was imprecise of me. I meant, the Impoundment Act was designed to prevent Presidents asserting a line-item veto over approved spending. The justification is the debt limit today, but was Nixon had other motives.

  21. What I am asserting is that borrowing in violation of the debt ceiling is precisely as illegal as not spending appropriated funds. When faced with a choice of either violating one of two contradictory laws, or violating the Constitution, is it your position that a President should chose to violate the Constitution?

  22. No, I’m of the opinion that the president should cite the constitution and blow through the debt ceiling. Damn the torpedoes, full speed ahead.

  23. It’s my opinion that he could defend doing so,legally, but only once all other legal options were exhausted. That won’t be for months, yet.

    The political problem for Democrats, of course, is that all the polling shows that your preferred option would be a political disaster. Maybe that would change once the public got a taste of a balanced budget. But I suspect you don’t want them to get that taste, because it might NOT change enough, and then you’d be stuck spending a lot less than you want to.

    So, in the event that BOTH PARTIES keep their steering wheels lashed straight for the next several months, leading to an actual crash some time in August or September, Obama will probably blow through that debt ceiling, and Democrats will pay the price. Personally, I don’t think the GOP establishment has it in them to hold tough that long…

  24. Frankly this argument is a loser. It shows what happens when peopel who supposedly know about law ignore normal legal principles because they are busy trying to bend law for ideological purposes.

    The appropriated funds do not constitute the “public debt” of the US. The public debt of the US consists of bonds including treasury bills which basically are bonds that mature within a year of issuance.

    In the case cited, only 4 members of the Supreme Court held that bonds can’t be repudiated by Congress, it was thus dicta. The 5th deciding vote was a concurrence that refused to join such analysis. The decision actually ruled for the government. The government wanted to pay the face value of a bond while the plaintiff demanded the gold value in currency. The majority including the concurrence granted only the face value. there was no need to discuss the clause in the 14th at all it was pure dicta. Significantly, the dicta noted a simple truth. That while public debt is a valid contractual obligation, that the US is free to grant itself immunity from suit. Thus the US can revoke authority of creditors to sue the US governemnt if desired. They did not say the 14th Amendment prevents such.

    Ultimately the dicta in this case stands for the proposition that Congres has the right to permit or take away the right of those holding public debt (bondholders) to sue the US governemnt in order to obtain a judgment if the US fails to pay the contractually agreed amound when a bond matures.

    As long as Congress grants courts the permission to issue such judgments at most those who collect such judgments could seek payment from government coffers. If government coffers lack the money to pay such judgments the courts do not have authority to force the government to borrow money from others in order to pay the judgments.

    At most it can be said the US government should pay any debt oligations first and only pay appropriations if there is money left over. The US has enough money to cover its debt obligations but not enough to pay appropariations.

    The whole issue of the debt ceiling is that democrats want the ceiling increased so that the government can issue additional bonds (borrow more money) in order to pay appropriations. Trying to claim that the 14th Amendment commands addiitonal borrowing to pay for appropriations is a loser argument.

    Likewise claiming the debt ceiling is unconstitutional because of this is absurd. There is in fact an historical and constitutional reason for the debt ceiling. Congress is given Constitutional authority to borrow. Congress thus used to pass laws to issue bonds. Congress has since delegated authority to borrow to the Federal Reserve BUT sets a ceiling of how much debt the Fed can issue. That is why the debt ceiling exists. Congress refuses to delegate authority to borrow any amount desired no matter what they set a limit.

    Congress can restrict the ability of the Fed to issue debt PERIOD. Thus The claim that Congress has no constitutional authority to limit how much debt the Fed can issue is patently absurd.

    The White house may not like having to pay debtholders first before spending any approapriated funds but that is in fact the proper result and arguably the proposition that Section 4 of the 14th Amendment and its interpretation by the courts stands for. Thus bringing up this proviison tends to hurt the White House priorities not help.

  25. Obama pushes it, he loses.
    Congress has the power to “pay the Debts” and “borrow money on the credit of the United States”

    Congress most certainly would have standing because it is their power, not the Presidents, and the President would be infrining upon their sole power.

    The treasury gets about 60% of what they need each month,the interest due on debt and Social Security could actually be paid, but leave other things we should fund unpaid. Congress could allow treasury to increase the debt for those expenses, or some portion of them, and say what sholid be covered.

    Another words, it is very unlikely we will default, Congress could raise the debt temporarily, or order that assets be sold, or various other tools.

  26. If I understand this the Constitution trumps any other law like the debt ceiling.

    The debt ceiling raise is needed not for new spending but that that has been already authorized by Congress, ie by law and thus the President has 2 duties:
    1) Uphold all laws that have been passed
    2) The debt has already been committed to over many years so it is valid and “shall not be questioned.

    That makes using the 14th a no brainer.

    The Presidential oath also requires the President to protect and defend the Constitution. If he does not follow it as laid out above one could argue you could impeach him as well.

    In fact all members of Congress took a similar oath so their inaction to provide the debt ceiling action needed to fund the laws passed by them could be deemed a violation of their oath of office subjecting Boehner in particular to impeachment. Right?

    The other issue here is that failure to protect the nation’s financial system from a meltdown is akin to “war” and the President again is bound to protect the nation as well. Keeping the nation from falling into a deeper recession, higher borrowing costs, higher deficits due to a double dip and the world losing faith in the US as a reserve currency makes his inaction on the 14th impeachable to me.

    Failure to act has been estimated to cost the US $50B minimum directly for even a few day default due to increased debt rollover costs and as much as a trillion over a decade not to mention higher borrowing costs for consumers and business as well.

    The President has put forth $2T in cuts and asked for $400B in tax loopholes being closed. Every deficit reduction plan that Reagan, Bush I and Clinton did required a combination. Why can’t the Repubs simply negotiate in good faith and get this done?

    If they do not they will get hung out to dry by the President being forced to act under his Constitutional duty. That surely isn’t going to help them defeat Obama. It might just sew up his re-election before they even have a primary.

    If they think he isn’t tough enough to do this. Just remember the Sunday nite we found about Osama or the Somali pirates that were taken out right after he took office.

    If he needs to he will act and get the job done as he should, no doubt about it.

    Here is the case law to support it:

    PERRY V. UNITED STATES, 294 U. S. 330 (1935)

    The government’s contention thus raises a question of far greater importance than the particular claim of the plaintiff. On that reasoning, if the terms of the government’s bond as to the standard of payment can be repudiated, it inevitably follows that the obligation as to the amount to be paid may also be repudiated. The contention necessarily imports that the Congress can disregard the obligations of the government at its discretion, and that, when the government borrows money, the credit of the United States is an illusory pledge…

    The Constitution gives to the Congress the power to borrow money on the credit of the United States, an unqualified power, a power vital to the government, upon which in an extremity its very life may depend. The binding quality of the promise of the United States is of the essence of the credit which is so pledged. Having this power to authorize the issue of definite obligations for the payment of money borrowed, the Congress has not been vested with authority to alter or destroy those obligations.

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