The Debt Ceiling: Why Obama Should Just Ignore It

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POLITICS JUNE 24, 2011

The Debt Ceiling: Why Obama Should Just Ignore It

With a Republican-controlled House demanding large cuts in present and future spending in exchange for an increase in the debt ceiling, the possibility that the federal government will have trouble financing and issuing new debt is becoming more frighteningly likely each day. Treasury Secretary Tim Geithner, CBO chief Doug Elmendorf, and Federal Reserve Chairman Ben Bernanke have all encouraged Congress in strong terms to resolve the debt ceiling stand-off before the creditworthiness of the United States is jeopardized. But barring a timely resolution to the standoff, could President Obama simply ignore the debt ceiling and keep making good on the country’s obligations? As the deadline grows nearer, the question has been popping up on law blogs and other forums, and according to a number of legal experts with whom I spoke, the answer, surprisingly, appears to be yes—and it is conservative justices who have played the biggest role in making it possible.

When it comes to Congress’s ability to stop the Obama administration from ignoring the debt ceiling, legal experts note that the first obstacle standing in its way is the question of standing, or whether a certain party has the right to sue over an issue in the first place. Jonathan Zasloff, a professor at the UCLA School of Law who has discussed this idea on a blog that he writes with several other academics, told me that while an order from the president for the Treasury Department to continue issuing new debt sounded extreme, it was unclear who could prove sufficient injury from the decision that would qualify the person to sue the administration in court. “Who has some kind of particularized injury, in fact?” Zasloff asked, and he could not come up with a satisfying answer.

Part of the reason for Zasloff’s difficulty in identifying an appropriate plaintiff is that members of Congress have tried before to sue the president for diminishing their legislative and appropriating power and have typically failed. In 1997, for instance, a small group of congressmen sued Office of Management and Budget director Franklin Raines, arguing that the 1996 Line Item Veto Act diluted their voting power as members of Congress. But seven justices of the Supreme Court disagreed, and did so largely by drawing from an earlier opinion written by Justice Antonin Scalia that denied environmental groups standing to challenge the government’s interpretation of the Endangered Species Act. In the majority opinion, then-Chief Justice William Rehnquist wrote that because the congressmen had not shown that their injury was “particularized,” and that the action of the President had not affected the congressmen in a “personal and individual way,” they did not have standing to sue.

In the case of members of Congress suing the current administration over the debt ceiling, the issue of standing would likely fall the same way. Louis Fisher, an expert on the separation of powers who worked at the Congressional Research Service for over twenty five years, wrote in an email that “case law is quite clear that a member of Congress, even if joined by a dozen or two colleagues, cannot get standing in court to contest a constitutional issue.” A joint resolution from Congress could try to get an injunction from the D.C. District Court to stop the Treasury from issuing new debt, but that could be easily vetoed by Democrats in the Senate. Barring that, Michael Gerhardt, a professor at the University of North Carolina who is a former special counsel to the Senate Judiciary Committee, says that a legal representative of Congress, perhaps the House counsel, could bring forward a suit on behalf of Congress. But Gerhardt also adds that, if this happened, the Obama administration would likely argue that the case was analogous to the 1997 case against Raines,and therefore there should be no “institutional” standing.

Leaving Congress aside, it appears the only possible party to a suit challenging the administration’s ability to exceed the debt ceiling would be a character that almost seems designed to elicit zero public sympathy: those who purchased credit default swaps which would pay off in the event of government default. Charles Tiefer, a law professor at the University of Baltimore, told me that Congress could pass a statute that strengthened the ability of this group of investors to sue as an injured party. But this statute, of course, could be filibustered in the Senate or vetoed by the president. Moreover, it would force Republicans to defend the right of those who had hoped to profit from a national default or dip in creditworthiness to sue the government because their payouts had been prevented.

But even if standing could be established and the Obama administration gets taken to court, some legal experts note that an additional argument of surprising strength could be made: The government cannot legally default on its debts. Former Reagan official and maverick conservative budget wonk Bruce Bartlett has suggested as much by invoking Section Four of the Fourteenth Amendment, which says that “The validity of the public debt of the United States, authorized by law … shall not be questioned.” Although there has been little litigation or discussion of this section, it could be read to imply an absolute firewall against statutory limits on paying or devaluing the debt.

Garrett Epps, a legal journalist and professor at University of Baltimore School of Law, has made an even broader argument in a pair of articles for The Atlantic’s website. In an interview, Epps told me that there was a strong argument that the debt ceiling is unconstitutional because it exceeds the legislative branch’s power of the purse. The argument goes like this: Because Congress already appropriated the funds in question, it is the executive branch’s duty to enact those appropriations. The debt ceiling, then, is legislative “double-counting,” because the executive branch is obligated to spend the money Congress appropriates, without having to go back and ask again for permission.

Of course, Epps admits, a move like this would represent a major assertion of executive power. Moreover, conservative Supreme Court Justices, no matter their past views, would have to reckon with a Democratic president ignoring a Republican House and ruling that he was able to do so with their blessing. Many of the legal scholars I spoke to expressed skepticism that Scalia and the conservative wing of the Court could be expected to go to bat for the Obama administration when it comes to the question of standing, as well as the broad conception of executive powers. Tiefer, however, was more optimistic: “I, for one, think that conservatives on the Court are faithful to their conservative principles of jurisdiction and they don’t alter them merely because on the merits they might be partial to one side.” If the Obama administration chooses to ignore the debt ceiling, they’ll have to hope he’s right.

Matthew Zeitlin is an intern at The New Republic.

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posted in: politics, united states, antonin scalia, ben bernanke, doug elmendorf, franklin raines, garrett epps, jonathan zasloff, tim geithner, william rehnquist, congress, department of the treasury, office of management and budget, senate, supreme court, ucla, us federal reserve

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