Wednesday, July 06, 2011

Under What Circumstances Can The President Ignore the Debt Ceiling?


The Fourteenth Amendment imposes a constitutional duty on both the President and Congress not to act in such a way as to bring the validity of the public debt into question. As I have explained in previous posts, the purpose of section 4 was to prevent the political branches from holding the validity of the public debt hostage as part of a political threat or in order to exact political revenge.

I believe that section 4 was designed to prevent what the Republican leaders of Congress are currently doing. Members of Congress should stop trying to use the risk of default to hold the country hostage in order to win concessions on ordinary matters of politics. The should simply increase the debt ceiling to match appropriations that Congress has already made. Then they should have negotiations about taxes and federal spending.

In the press and in the public commentary, however, the issue has been repeatedly posed as whether or not the debt ceiling is constitutional under section 4 of the Fourteenth Amendment.

This is the wrong question.

We have had a debt ceiling in this country for a long time. Imposing a ceiling on the amount of debt the United States can take on does not by itself violate the Constitution. Quite the contrary, doing so is an exercise of Congress's powers under Article I, section 8.

Rather, the correct question is whether either the President or Congress, or both, are acting in a way to call the validity of the public debt into question. If they are, then they have a constitutional duty to stop, and take appropriate measures. In this case, I believe that Congress is behaving inappropriately, and they should stop. In order to avoid calling the validity of the public debt into question, they should raise the debt ceiling immediately. Indeed, as a matter of good public policy, they should tie decisions about the debt ceiling to decisions about appropriations, as was the practice until recently. President Obama has complained about Congress using the debt ceiling like a gun to extract political concessions, and he is right to do so.

The duty imposed by section 4 of the Constitution exists whether or not a court could order either Congress or the President to act. There are many constitutional duties that no court can order either the President or members of Congress to perform. This may well be one of them. Congress is doing pretty much what the framers of the Fourteenth Amendment did not want them to do. But it is not clear that anyone has standing to force Congress to live up to its constitutional duty.

There is a second question making the rounds, which is equally misleading: People want to know whether the President may threaten to issue new debt if Congress does not raise the debt ceiling.

Again, this the wrong question to ask. For one thing, the President must be careful not to take any steps that might call the validity of the public debt into question. Making such threats at present might be highly counterproductive; it might actually undermine the economy because it might signal that the President believes that United States is about to default and hasten the questioning of the validity of the public debt. Moreover, the whole point of section 4 is not to engage in political gamesmanship over the public debt. (Considered in its best light, this may explain President Obama's reticence to discuss the constitutional issue.).

If Congress refuses to raise the debt ceiling, the President is bound under Article II to take care that the laws are faithfully executed. This duty includes *all* of the laws, including section 4 of the Fourteenth Amendment, the laws passed by Congress that appropriated funds and ordered the President to spend them, and the debt ceiling.

The President (and the Treasury Secretary) must therefore act in such a way as to honor all of these commitments to the greatest extent possible.

The President must use every available legal option to preserve the validity of the public debt, through accounting measures, and through selectively deciding which bills to pay and which to delay paying.

What I have just said assumes that not every service that the government provides is part of the public debt within the meaning of section 4. Thus, I assume that a government shut-down, in and of itself, need not violate section 4 of the Fourteenth Amendment, if the government does not default or threaten to default on "the public debt," however that is defined.

It is possible that the President and Congress may disagree about what falls within that definition. If so, the President must make the call as best he can, because he has an independent constitutional duty not to violate Section 4 of the Fourteenth Amendment. He does not have to accept Congress's view. He may view the factors that lead to questioning the public debt more broadly than Congress, because he may worry that markets will see the government's operations (and thus its creditworthiness) as interconnected.

But suppose that the Secretary of the Treasury has exhausted all possible accounting tricks and methods for preventing default on the public debt, that the validity of the debt is likely to be put in question as a result, and that Congress still has not raised the debt ceiling. (Note that when I say, "all possible," I mean that the Treasury Secretary has a legal duty to try everything, including things that would be very unpopular.)

The President and the Treasury Secretary have come to the end of what they can do, and Congress still has not raised the debt ceiling. Then one of two things will happen.

The first is that the markets will start to melt down, and Congress, finally realizing that they have brought on economic Armageddon, will raise the debt ceiling. The President will have complied with his constitutional duty, and the members of Congress will have complied with theirs. (At least until the next showdown).

I think that this is what will happen. As soon as the markets begin to slide, Congress will make a deal. The Republicans in Congress may be stubborn, and even wrong headed at times, but I continue to believe that they are not crazy.

But suppose that this does not happen. Suppose that the Republicans in Congress turn out to be like Pharaoh in the Old Testament: No matter how many plagues are visited upon Egypt, his heart is still hard.

Imagine, then, that the hearts of the Republicans in Congress are as hard as Pharaoh's heart.

Then we have the second possibility: The markets are cratering. The world economy is dissolving before our eyes.

In these extreme circumstances, the President's Article II powers come into play in a different way.

The President has inherent emergency powers, at least as a default rule. Think about the President's power as Commander-in-Chief. The President has the authority to repel attacks on the country or on American citizens, and to safeguard vital American interests in times of emergency, when Congress cannot act.

Some scholars believe that this power is not only inherent in the executive, but that it cannot be taken away by Congress. I do not agree. I believe that the President has the power to act as a default rule in emergencies, subject to Congress's creating rules that limit and guide his actions. In this case, Congress has authorized presidential action in emergencies in a series of laws beginning with the early Militia Acts.

But sometimes the President acts where it is not clear that he has power (even as a default), or where it is likely that he does not have power. When the President acts in an emergency without congressional authorization in these situations, he must ask Congress for retroactive authorization of what he has done. He is "borrowing" power temporarily, so to speak, and this debt must promptly be paid.

The most famous example of "borrowing power" is Lincoln's suspension of habeas corpus at the beginning of the Civil War, which was retroactively authorized by Congress. Congress, and not the President, has the power to suspend the writ. In my view it is illegal for the President to suspend the writ on his own. But Lincoln acted, arguing that nobody else could act because Congress was not in session, and a decision had to be made. Equally important, he acted publicly, and gave his reasons for acting in public. (It would be a different matter if Lincoln had acted in secret and told no one, in order to avoid responsibility to Congress and the public). But here he acted transparently. And having acted, he recognized that he was at Congress's mercy. They could approve what he did retroactively, or they could impeach him.

This is the right way to think about what would happen if the country was really about to default, and the Treasury had exhausted all possible options under the current debt ceiling. Under these circumstances, the President would authorize the issuance of new debt if he believed that it would stabilize the situation and prevent default and economic catastrophe.

Without Congressional authorization, this action would be of very dubious legality. Indeed, without subsequent authorization, it would be illegal. As I read the Constitution, only Congress has the power to authorize new debt. But in extreme circumstances the President would do so anyway, arguing, like Lincoln, that Congress can approve what he does after he does it. But it would be essential that he did so publicly and did not try to hide what he was doing under a cloak of Presidential authority or national security. (This is the problem of the George W. Bush Administration. This Administration also justified its actions in the name of emergency, but it asserted a right to act in secret without any authorization at all, and the debate over retroactive authorization began only after it was found out.).

In this extreme case, the President acts because no one else will act, but in so acting he puts himself at the pleasure and mercy of Congress.

He says, in effect: "This is what I have done to save the country. If you approve of it, then it is legal. If you do not approve, you may impeach and convict me. But now you must choose what to do. The responsibility is yours."

This is a very dangerous game to play. Even when they are open about what they are doing, Presidents should not act like this unless there is absolutely no alternative. That is because this gambit, once begun, may be come habitual. Presidents may start to violate the law in private, hoping that no one will notice what they have done (Again, see the Bush Administration). Congress can become lazy or cowardly and simply wait for the President to do all the work and take all the risks. We should not be so eager to expand the President's power to act unilaterally, no matter how noble the cause, for the next President may not be one we like as well and the cause pursued far less praiseworthy.

That is why it is misleading to ask whether the President has or does not have the power to issue new debt beyond the debt limit without Congressional authorization. He will indeed issue new debt if worse comes to worse, but that is because he has no other choice. And he will need Congress to authorize what he does eventually.

Even so, the present situation is not quite the same as Lincoln's suspension of habeas corpus, where Lincoln could plausibly argue that Congress could not act and and therefore had not disapproved of his actions. (Of course, Congress could not act because Lincoln had conveniently not called them into session).

In this case, but not in Lincoln's case, Congress has specifically said: "we don't want to raise the debt ceiling." So the President is not acting in a vacuum; he is acting in defiance of Congress, and his powers are therefore at their nadir, and should be.

In this respect, the situation is closer to Truman's seizure of the steel mills in 1952. Truman acted and then (it is often forgotten) asked for Congress's authorization. They did not give it. Yet that case, too, was different than the present case, because the courts could hear the Steel Seizure Case and resolve it so that Congress did not have to act. They could avoid responsibility. It is very unlikely that the courts could hear a case arising out of the current facts. So in this case, Congress would be forced to put up or shut up.

Moreover, the situation is also different from past examples because the damage to the country and to the world economy may be even greater than the damage that would have resulted if Lincoln had not been able to suspend the writ in 1861; it certainly seems to be a greater emergency than the danger of a labor strike in 1952. So even if the President's powers are at their nadir, he still might have the power to risk his power.

Such an act, in my view, is not legal when done, but it may become legal later on, if Congress approves. But it is a dangerous maneuver. If Congress does not approve it after the fact, then the President has acted illegally, and he may be impeached and removed from office.

Such an act may be necessary. It may stave off disaster. But it is no way to run a country.

Suppose, however, that it came to that. If the bond markets are going crazy, America's economic reputation is being destroyed, and the world economy is facing disaster, I do not doubt that Congress will approve the President's efforts to save the country after the fact. Congress will raise the debt ceiling (what they should have done in the first place) and declare that the new bond issues are valid.

Congress may be very angry at the President for acting, and they may denounce him, but they will recognize he acted in an emergency that they themselves created. The members of Congress will also recognize that if they impeach him for saving the economy, they will damage the credit of the United States even more.

It will likely never come to this. Congress will raise the debt ceiling long before the markets begin to crumble. Or, at the first sign of crumbling, Congress will almost certainly raise the debt ceiling. But if this does not happen, then I have described the very limited circumstances under which the President might act.

Note, however, that this is very different from asking whether the debt ceiling is constitutional or unconstitutional.

Read other posts on the debt ceiling crisis