OK, so this is important because of the debt ceiling thing. Here is the text;
Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
OK, got it. The US will pay its debit and no law may be passed that would renounce that debt. No state nor may the United States pay any debt that supported the Late Unpleasantness. Am I right?
So does that mean … well actually in regard to the debt ceiling? We have to pay the debt, but does it also mean we can borrow as much as we wish? Or what?
That means that once the United States has borrowed money, it must pay it back. This clause prevents the US from incurring debt and then declaring it won’t pay back the debt, and avoiding a lawsuit by asserting sovereign immunity.
This has little to do with the debt ceiling.
The debt ceiling is the limit, passed by Congress, of how much money the United States can legally borrow. Since Congress set the limit, Congress can increase it.
The United States cannot incur any debt without Congressional action.
Right, but since it hasn’t been borrowed yet, this clause doesn’t allow for MORE AND MORE borrowing. Some say that since Congress has approved the expenditure, then the money must be borrowed. I don’t see it that way. They authorize an expenditure, but there is no money in the till. Oops, we need to borrow. Without a debt ceiling increase, they can’t do that. At least that’s how I see it.
The economist Brad DeLong discusses the implications of revoking the Gephart rule, ordering more spending than taxation, and refusing to raise the debt limit simultaneously.
Obviously something has to give. But the thinking is that payment of principle and interest on the debt is the top priority. After that things get murky.
Emphasis added. That’s an excerpt from the first link. Interested readers might look at them all. The last one notes that if the Treasury issued debt anyway, then a future administration could repudiate it, as it had not been authorized by Congress. Then the case would go to court.
That’s pretty much the problem. Congress has simultaneously ordered the Treasury to disburse money while at the same time denying the Treasury permission to obtain the money. Whatever the Treasury does at this point will be a violation of Congressional direction.
True, but the administration has 3 conflicting choices, not 2.
It can withhold interest payments (except for the 14th ammendment)
It can spend less, which breaks the law.
It can borrow more, which breaks the law.
Numbers 2 and 3 conflict. Breaking the laws of arithmetic is not an option.
In other news the conservative economist Bruce Bartlett, who designed the Kemp-Roth tax cuts, thinks that the 14th amendment makes debt limits unconstitutional: “…the very existence of the debt limit is unconstitutional because it calls into question the validity of the debt.” He concedes that, "…provoking a constitutional crisis over the debt limit is a bad idea, but a debt crisis would be worse. "
Agreed. But this problem doesn’t involve the 14th amendment in any way.
The question is: Does the authorization for an expenditure override the previously enacted debt limit. I say no. When laws are in conflict you first try to see if they can be harmonized. They can be harmonized by saying that implicit in an authorization for spending is the caveat “If we have the money.”
To say otherwise would make the debt limit laws completely meaningless, obviously something Congress did not intend to do.
My stance is the law is ambiguous. So I can play devil’s advocate on both sides.
The law doesn’t say, “If we have the money.” It says, “Send social security checks out at the beginning of the month and don’t borrow any more money to do it and don’t raise taxes because we haven’t authorized that.”
If you think the debt limit is binding, then you are giving carte blanche to Obama to suspend social security checks in red states only. Now obviously that won’t fly, but the more general point is that you are conceding a lot of discretionary authority to the Executive. Far simpler would be to say that orders to spend and tax imply an order to borrow.
I don’t really believe that either. My take is that Congress has ordered the Executive branch to do the mathematically impossible, and is therefore forcing them to break the law. How that plays out is a matter of negotiation, judicial politics and juvenile psychology.
The law is contradictory, but not ambiguous. The 14th Amendment states that debt must be authorized by law in order to be entitled not to be questioned. One must take that reading at face value. If the Executive were to issue debt on its own authority, it is clearly not issuing debt that was authorized by law, as the 14th Amendment states.
Almost every law which directs the expenditure of funds does not do so with reference to how the funds are to be raised. The unstated premise of these laws is that there are funds in the treasury to be spent. A spending law of this sort no more directs the issuance of debt no more than it does direct the increase of taxes. Think about it for two seconds: if an appropriations bill implies the authority to raise revenue to cover the expense, then why can’t an Executive simply order tax rates changed to cover the expense?
Very true. But let’s also keep in mind which branch of government is responsible here: constitutionally, it ain’t the Executive. The greatest power of Congress is that of the power of the purse, and not just the fun part of spending money, but also the annoying part of having to raise the money. Even more specifically, the House of Representatives is in charge of originating legislation which pertains to the raising of revenue.
Constitutionally, if the House fails to originate such a measure, it is hard to pin the blame on the Executive, because the Legislative would have failed to exercise its obligations under the balance of powers. How it would play out in the eyes of the people would remain to be seen.
That’s not my understanding: most budgets passed since 1979 reflected The Gephardt Rule which set the debt limit automatically at the level of the most recent budget resolution. The Gephardt Rule was set aside in 1995 by Gingrich and again in Jan 2011, but this isn’t typical behavior.
You could argue that given a mathematically impossible order by Congress, the Executive should follow the law in such a way that maintains the balance of powers to the closest extent possible. That would mean issuing debt, not making policy decisions on the tax or revenue front.
But really, my position is that, “The law is contradictory” (I guess it’s the interpretation of it that I find ambiguous.) Perhaps some clever jurist has laid down principles for proper legal interpretation of mathematically impossible directives. Consider the previous paragraph to be Devil’s Advocacy. If anybody wants to seriously push it, I’ll happily take the other side as well.
The budget being referenced there is not a spending or revenue bill. It is a budget resolution which establishes a blueprint for the tax and spending bills that will be considered later that year. A budget resolution on its own does not make any laws regarding taxes or expenditures.
No money can be spent from the Treasury but by consequence of appropriation by Act of Congress. Yes, the U.S. is responsible for it’s debt, but there are a number of problems I foresee. The first is that no appropriations for the armed forces can be made for more than 2 years. Right now the country has been involved in protracted wars costing Trillions. Basically they must be using an accounting trick where they use revenue generated to support the wars and borrow to pay for social programs. Another interesting venture is Libya, where no appropriation has been made by Congress, yet Obama is taking money from the Treasury for the operation. One other constitutional item is borrow on the “full faith and credit of the US”…
guess what… we are about to lose “full faith and credit”. Which will mean the Us will be unable to borrow. So what will happen is they will pillage our bank accounts to pay the debt and tax the “key-rap” out of us…get ready for the revolution…it won’t be televised.
Let’s say the deadline comes and goes, and the Administration continues to pay the bills and sell bonds just as before. Arguably, it has no authority to do so, but arguably it has no authority to continue military action in Libya but that hasn’t stopped it any. What happens then?
The financial markets have a strong influence on both political parties, of course. Neither party nor any court is going to be too keen to upset them, no matter what the Tea Party says.
On what grounds might you refuse to pay? I see (I think) what you’re saying: that the US could assert, “Yes, the debt is valid, but too bad; I’m not going to pay!”
That’s the kind of reasoning that would be of no help to me in my dispute with Mastercard, for example. If I admit the debt I owe Mastercard is valid, but simply refuse to pay, Mastercard may sue me for the debt, obtain an easy win (given my admission) and then execute the resulting judgment against me, directing the local sheriff to seize and sell my personal property to satisfy the judgment.
When the debtor is the United States, how would that work?
The Republicans make a lot of noise about how the Obama administration is illegally increasing the deficit and imply that the debt problem is all the Democrats’ fault. A few Republicans will talk about impeachment but it won’t get past the talking stage as the Republicans won’t want to have a public hearing on this issue.