Three Ways Obama Could Raise the Debt Ceiling On His Own

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DEBT CEILING OCTOBER 6, 2013

Three Ways Obama Could Raise the Debt Ceiling On His Own The controversial, risky options if Congress doesn't act

What should the president do if Congress refuses to raise the debt limit? The question is like asking what the president should do if Congress orders him to drop a nuclear bomb on Manhattan. He should act in the public interest and accept the consequences. The legalistic argle-bargle necessary to take him from A to B is almost beside the point. But perhaps it is a worthwhile exercise to imagine what the law would say.

Imagine, then, that Congress does not raise the debt limit. Sometime later this month, it becomes impossible for the Treasury to pay all U.S. obligations—including interest on the national debt, payments to Social Security and Medicare recipients, and salaries and pensions to government employees such as soldiers and food inspectors. Tax and other revenues coming in will fall short of payments that must go out. If the president does not violate the debt limit and borrow more, he will have to choose among these obligations, paying some and defaulting on others.

It is hard to imagine such a state of affairs lasting very long (or even getting started), but imagine we must. If the president stops paying interest on the debt, financial markets could freeze up, as they did in 2008. Banks would shut down, people would be thrown out of work. If the president instead stops making Social Security and Medicare payments, or stops paying the salaries of soldiers, a huge amount of hardship and even danger would result. Whatever he chooses, the United States would be thrown into its most dangerous crisis since the Depression. By contrast, if he borrows money above the debt limit, then he can continue to make payments and avoid these bad outcomes.

So it is more likely that the president will borrow money in violation of the debt limit (assuming as we must that he and Congress do not compromise) than that he cuts spending. He could conceivably make three legal arguments that he possesses the power to do so.

 

First, he could argue that, under the best reading of the relevant statutes, Congress has in fact ordered him to borrow rather than cut expenditures.Appropriations statutes order him to spend and do not give him the authority to cut spending. If revenues fall short, he normally can borrow, but the debt limit will prevent him from doing that, and other laws forbid him to raise funds in other ways, for example, by raising taxes or selling federal property. So there seems to be an inconsistency among the statutes. When statutes are inconsistent, they must be reconciled in the best way possible. And there is a rule that a later statute—here the appropriations laws—supersede earlier statutes, the debt ceiling. But that interpretation implies that the debt ceiling is meaningless, and that Congress could not erect a debt ceiling even if it wanted to. Conflicting statutes should be reconciled so as to preserve their meaning as much as possible. A better interpretation, which preserves a meaning for both the debt ceiling statute and the appropriations statutes, is that the commands to spend are implicitly conditional on sufficient funds being available. As the money dwindles, the president must cut expenditures commensurately.

Professors Neil Buchanan and Michael Dorf argue that, because the president cannot literally comply with the debt ceiling and the appropriations rules, Congress has forced him to act unconstitutionally. Trivially, a violation of a statute by the president is a violation of the Constitution because (with exceptions not relevant here) he may act only with statutory authorization. Buchanan and Dorf then argue that borrowing in excess of the ceiling is the “least unconstitutional choice” because the president would substitute his judgment for Congress’ less by borrowing in excess of the debt ceiling than by cutting expenditures, which would require fine-grained choices, inevitably influenced by policy judgments, among many different spending programs.

A presidential choice to engage in the “least unconstitutional” act, with its unfortunate echo of DNI chief James Clapper’s statement that he lied to Congress in “the least untruthful manner,” would not go over well with the public. In response to such skepticism, Dorf fires back, “If, at the end of the day, the President concludes that issuing unauthorized debt is the least unconstitutional option but [the] President’s political staff concludes that it is best to sell the least unconstitutional option to the public as constitutionally valid, he still will have complied with our decision procedure.” In other words, he will lie to the public about his legal reasoning, no doubt only seconds before the truth leaks out to the press. This statement of the argument constitutes its own refutation.

Statutes often conflict with each other, and the solution is always to adopt the interpretations that do the least violence to the different statutes. The resulting interpretation is the law, and the president acts constitutionally by obeying the law. Thus, he never faces a Sophie’s choice of unconstitutional options. True, the president must exercise considerable discretion under complex conditions to cut spending, but if the proper interpretation of statutes tell him to do so, then he must so act. The president exercises similar kinds of discretion every day, as, for example, when he decides how to allocate limited resources among prosecutions under the hundreds of criminal statutes that Congress has enacted without giving him the funds to enforce all of them.

 

A second way the president could borrow money even without Congress raising the debt limit: He could argue that he must borrow money under Section 4 of the 14th Amendment, which provides that “The validity of the public debt of the United States, authorized by law . . . shall not be questioned.” But the 14th Amendment does not give the president the power to borrow money in order to service the debt—indeed, Section 5 gives Congress, not the president, “the power to enforce, by appropriate legislation, the provisions” of the Amendment. And it is Congress, not the president, that possesses the power to borrow under Article I of the Constitution; the 14th Amendment does not abrogate that rule. Some commentators, like Professor Elizabeth Price Foley, argue that the Amendment does not empower the president to lift the debt ceiling because the president can service the “debt” from tax revenues; he can disregard obligations to pay Social Security, Medicare, and the like, which are not “debt.”

 

Third, the president can declare an emergency and justify borrowing by citing reasons of state. What exactly he should say is a political, not legal, matter. The declaration could be garlanded with quotations from the founders, or festooned with solemn appeals to the examples of Lincoln and FDR who also acted unilaterally in the face of crisis. The president could invoke his “inherent” executive powers under Article II of the Constitution (which vests the president with mostly undefined “executive” powers); he could even cite the 14th Amendment or offer a strained interpretation of the relevant statutes or don whatever other leaves his lawyers pluck from the potted fig trees kept at the ready in the White House Counsel’s office. But whatever he says, the reality and the implication will be that the law has run out and he is acting in the common good because Congress has plunged the nation into a crisis.

 

Whether this gambit would work is exceptionally difficult to predict. It depends entirely on whether the public and relevant elites approve of the president’s actions. One problem is that an assertion of emergency would lack plausibility until after markets start to collapse. Thus, the president would need to wait for panic to set in before declaring an emergency. In light of the unpredictability of financial markets, the president may give in on the Affordable Care Act rather than take the risk of an economic collapse.

Another problem is that House Republicans could argue that the president can end the crisis without doing anything that is even the least bit questionable from a legal perspective—simply by yielding up the Affordable Care Act. They could thus argue that no emergency exists at all, or it is of the president’s own making. This argument would expose the emergency declaration as a device for expanding executive power or resisting congressional encroachment on it. The president would need to argue that he is justified in raising the debt ceiling in order to avoid being bullied by Congress. On the other hand, if the Senate turned down a deal to cut back on the ACA, and Congress deadlocked, then the president’s claims would take on additional force.

A number of commentators worry that if the president violated the debt limit, the new debt obligations would be legally invalid, so no one would lend to the U.S. government. It is impossible to imagine courts forbidding the president to issue debt; they could easily claim that they lack the power to do so. If they accept any of the arguments above, they would refuse to do so on the merits. It is conceivable that courts might refuse to enforce the debt obligations when creditors sought to enforce them in court, but that wouldn’t matter. Creditors don’t care what courts do: they will borrow if and only if they believe that either the president himself (through further unauthorized borrowing) or Congress (after if finally gets its act together) will honor the government obligations issued at the command of the president acting alone. Since the United States has almost always honored its obligations, and since even today no House Republican has said that he or she believes the U.S. should default on its debt, creditors will lend to the U.S. in the emergency—though possibly at a somewhat higher rate than normal, reflecting the additional political risk of not being repaid.

The president will not claim the power to suspend the debt ceiling in advance of the crisis because it doesn’t serve his political interest to do so. That is why both the statutory interpretation argument and the 14th Amendment argument, which do not depend on a crisis being in existence, are dead on arrival. He does better by keeping mum about his emergency powers while pleading helplessness, so as to impart to Congress horrific visions of the AARP’s troops charging up Capitol Hill, swinging their canes at House Republicans who stray in their path. If President Obama claimed that power now, Republicans could both press ahead with the showdown secure in the knowledge that a financial crisis will not take place, and accuse the president of asserting dictatorial powers. But if the debt ceiling is not lifted, he would have no choice but to act—with unpredictable consequences for the future of our constitutional system. 

Eric Posner is a professor at the University of Chicago Law School. Follow @EricAPosner on Twitter.

 

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posted in: barack obama, constitution, john boehner, shutdown, government shutdown, 14th ammendment, politics

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