Monday, January 21, 2013

Our Exceptional Debt Ceiling, the Lessons of Comparative Constitutionalism, and Separation of Powers

Miguel Schor

According to the Wikipedia entry on the debt ceiling crisis, the United States and Denmark are the only nations in the world that have a debt ceiling (and Denmark apparently sets its ceiling so high that it is a non-issue).  The United States government first decides on a budget and then authorizes the Treasury to borrow the money needed to finance the budget.  The rest of the world apparently has come to the conclusion that if a nation enacts spending programs, it also agrees to borrow the money to pay for it.  This one step process was actually the rule in the United States in the 1980s and early 1990s and was known as the Gephardt rule (named after former Congressman Dick Gephardt who implemented the rule).  The rule reverted back to the 2-step process when Newt Gingrich became Speaker of the House in 1995.  This 2-step process has become a source of serious friction in recent years.  In 2011, Standard & Poor’s downgraded the creditworthiness of U.S. bonds after concluding that “political brinkmanship” and partisan infighting made it somewhat more likely that the United States would be unable to reach an agreement on fiscal policy.  In recent months, House Republicans threatened to not raise the debt ceiling unless spending cuts were enacted.  They have now backed away from that threat after sensibly concluding that a default would be bad for the Nation and for the Republican Party.  The debt ceiling, however, remains a real problem.  The comparative evidence and our own historical experience suggest that the debt ceiling is unnecessary and exacerbates political conflict.

I think there is another reason why the debt ceiling is a bad law.  There is a rich literature criticizing separation of powers because it facilitates existential struggles between legislatures and presidents.  The seminal article is Juan Linz's “The Perils of Presidentialism.”  The argument is that fixed terms for each branch facilitate democratic breakdown since these terms do not correspond to the exigencies of political events and each branch can claim that it has an electoral mandate to fix the nation's problems.  In a presidential system, snap elections cannot be used to have the electorate resolve a crisis and politicians, protected from the voters by a fixed term, may prefer conflict over co-operation.  The conflict that presidentialism institutionalizes has been less of a problem in the United States than in Latin America (where presidentialism has a poor track record in sustaining democracy) because the political culture in the United States was, at least for much of the 20th century, less conflictual than had historically been the norm in Latin America.

All systems of governance, of course, suffer from pathologies and the potential of democratic breakdown.  But Linz's observations on how presidentialism can break down illustrate how poorly the debt ceiling interfaces with our constitutional system.  At time T-1, a legislative majority decides to spend x dollars.  At a different (and later) time (T-2), a legislative minority that controls one House decides to use the debt ceiling as a means to undo the spending enacted by earlier majorities.  The legislative minority lacks the votes to enact its favored spending bill but can use the threat of destroying the Nation’s creditworthiness to extract concessions from the majority party.  The point is that the "pathology" of presidential systems—which is that they are susceptible to inter-branch, partisan conflict—is exacerbated by statutes such as the debt ceiling that afford a political minority that controls one branch of government the power to completely disrupt the operation of government.

Miguel Schor is Professor of Law at Drake University School of Law. You can reach him by e-mail at miguel.schor at