The 14th Amendment and the Debt Ceiling

Great Debates
1

The Constitution has a handy part of the 14th amendment which states the “validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services . . . shall not be questioned.” A plain reading of the section seems to show a debt ceiling is unconstitutional What’s stopping Obama from invoking the 14th amendment on 12:00 am Oct 18? If Obama were to invoke the 14th amendment, would the Treasury then continue to print money? Does Obama has to invoke the 14th amendment? Why couldn’t the Treasury Secretary unilaterally invoke it? Would the Supreme Court get involved? Would the Supreme Court be more or less inclined to agree with the President? Would this be a unconstitutional view of the 14th amendment? Would the House try to impeach the President?

  • Honesty

P.S. This might belong in GQ, but started it here.

2

The 14th Amendment is not a power to be invoked. It’s a restriction of government power which prohibits the renunciation of the issuance of debt in accordance with law. In essence, Congress can’t repudiate debt once it is issued. There is no power granted to the Executive Branch.

3

How so? Putting the politics aside, how is setting a debt limit of, say, $20 trillion somehow questioning the validity of any debt or unconstitutional? You just can’t have more than $20 trillion outstanding.

It would be akin to saying that a bank is forcing you to default on existing debt by placing a limit on how much you can borrow.

4

I’ve mostly given up on talking about the history/legality of the debt ceiling, I’ve relegated it to the dustbin of “things the SDMB will never understand” along with concepts like corporate personhood. But once more, since I’m an idiot incapable of learning my lesson.

For around 130 years, from the time the United States Constitution was written up until the late 1910s when we entered the First World War debt was issued with explicit congressional approval. This both predated and post-dated the 14th Amendment.

It also was absolutely, positively, in line with the wording of the Constitution–which makes it explicit that it is an exclusively legislative power to approve debt issuance. The executive has no power in this regard.

Let that sink in: the executive cannot issue debt. No power in that regard.

Now look at what the 14th Amendment says about debts–that they cannot be “questioned.” I’d like someone to construct a logical argument as to how a prohibition on questioning the validity of the debt extends to meaning “the executive, in contravention of the original articles of the Constitution, can issue debt unilaterally.” If you think you can get there from here, then your definition of logical is far different from mine.

When we got into World War I, instead of Congress approving debt issuances they adopted a debt ceiling type scheme. They basically said, “yo Wilson, here’s a credit limit of $1bn. You can issue bonds as much as you want until we have $1bn of them outstanding.” (A huge number at the time.)

This had not really been done before, and in essence was “Congressional preapproval.” As I’ve explained probably approaching ten times, thus the debt ceiling was issued for the convenience of the executive, as a permissive gift from the legislature, and in no way gave the executive unilateral authority to issue unapproved debt. It’s like the credit limit on your credit card, and since the legislature sets the limit, it does not violate the constitutional principle that debt can only be incurred by the United States when it’s been approved by the legislature.

This idea that the debt limit is somehow a strange and evil restriction we put on the Presidency is so far removed from the truth–in fact the exact negative of the truth, that it boggles the mind so many people start from that assumption when looking at the issue. The debt ceiling was a matter of convenience between the executive and the legislative. Wilson was not sure how much our involvement in WWI would cost, and honestly neither was the legislature. They didn’t want to politick over it constantly, so they gave him a big credit line and said have at it–but they did set a limit, so that if things got crazy they’d have to approve more debt, and in this way they preserved their power to stop it from getting any crazier if they had decided after $1bn we had spent too much.

5

Read the transcript of Obama’s press conference today. He spent a few minutes talking about why he didn’t want to invoke the 14th amendment.

6

No, I’m looking at it another way. Follow along with me.

Let’s say government is at the $20 trillion outstanding debt cap (from your example). The government owes 10,000 senior citizens a check for $982 on the first of the month, the government has received only enough income to cover 80% of the 10,000 senior citizens, the rest there is no money for. Wouldn’t the lack of payment to the 20% “question the validity of US debt?” SS benefits are debts owed by the government to retirees, correct? The same would go for money paid to the military and other national agencies.

The U.S government pays more than it brings in,meaning that there’ll be some parties that won’t get paid or paid late. Doesn’t this question the validity of the debt?

Thanks.

7

Hey, I don’t think the debt ceiling is on evil restriction put on the Presidency. I’m just curious on what legal tools Obama could unilaterally use to sidestep Republicans on the issue. Nothing more, nothing less.

8

Why would he talk at all about something he cannot do? There’s no 14th Amendment clause for him to “invoke”.

I’m curious now, do you accept Martin Hyde’s reasoning and now believe that the 14th Amendment is not a legal tool Obama could unilaterally use to sidestep Republicans on the issue?

9

You guys do understand that federal revenues give us plenty of money to pay our interest? In other words, we don’t have to issue more debt to keep up with the interest on the national debt? We can just pay the interest out of the money we take in each month. We just won’t have quite as much as we would have if we could go further into debt, so we’ll have to cut back somewhere. I’d argue that the 14th Amendment is meant to make sure the area we cut back in is not paying the interest on the national debt. In other words, it means pretty much the opposite of what you think it means, like Martin Hyde said more eloquently.

10

Well in the present case Congress has made commitments for x dollars, and set the limit for borrowing at something less than x, and is demanding that the President negotiate with them to spend less before they refuse to borrow the money they’ve already spent.

The congresscritters who have shut down the government also suggest that increased tax revenue cannot be a part of the deficit solution. You’re right that it does not make sense, but not for the reasons you imply.

11

Congress hasn’t passed a spending authorization bill for this year. That’s why the .gov is “shut down”. The expectation is that they will pass one, and that it’ll authorize slightly more spending than last year’s, which authorized slightly more spending than the year before’s, but it hasn’t actually happened yet.

12

No, there have been official pronouncements/rulings that benefit payments are not the same as debts in constitutional terms.

13

I’m not here to argue the politics. “Contradictions” in the actions or inactions of the legislature have never before been interpreted to mean “so now the President gets new powers the Constitution specifically says belong to another branch, and that he has never exercised previously in our history.”

14

No, and rather that explain what has already been explained very clearly, I’ll just be brief about it. We all know that the U.S. national debt is $16 trillion or thereabouts.

That $16 trillion does not include future obligations to pay our military and civil servants, contractors who are building ships, and so on. That’s simply how much money we’ve borrowed from people by selling bonds.

The debt is only the total amount of bonds we’ve sold. It isn’t contractual obligations. Therefore, not paying civil servants, the military, or whatever is NOT A DEFAULT ON THE DEBT, because the debt doesn’t include those payments.

15

This is true, but by statute we have spending that the executive is allowed to legally continue even without a CR. It does not have to be that way, but we’ve structured our laws and funding so that things like the military don’t get shut down entirely due to a failed budget. In fact, so much of the Federal government is funded under this sort of thing that something like 80% of the actual spending keeps on going during a shut down.

For example, things like Social Security benefits can legally continue to be paid even without a CR or budget (because of previous legislation) because statute says the government is required to pay those benefits basically in perpetuity. BTW, the reason things like Social Security benefits are not considered actual debts is the only thing entitling individuals to them is statute, they are not part of a “debt issuance.”

The 14th Amendment would prevent us from legally passing legislation that says, “all 30 year treasury bonds are null and void, and do not represent a claim against the United States.” But it would not prevent us from saying “we’re cancelling the Social Security program.” The Social Security benefits regime is a creature of statute, and can be modified or even killed outright by other statutes.

All that is to say, a lot of actual legal spending will continue even during a shut down, probably enough that we’d have to stop paying for some things that statute says we have to pay for, in which case we’d have to engage either in prioritization or we’d just “pay as we can” using a first in first out payment system. Going FIFO would most likely mean we missed some interest payments along the way on bonds.

16

It’s a bit goofy, but the trillion dollar coin I think actually is one of the better legal ways Obama can get out of this situation with no help from the legislature. The executive, at least now, really does have sole power to mint coins.

Other possibilities:

  1. Perhaps the President could sell all the gold in Fort Knox, probably to the Federal Reserve in exchange for currency. This would generate around $195-200bn at current gold prices and would put off a default for a bit.

  2. The Federal Reserve can basically buy up as many bonds as it wants, since it basically “creates money” to do so, there is no limit to how many they can buy. I speculate maybe the Federal Reserve could buy up say, $1 trillion in debt and then through some mechanism the Treasury could call it “retired, so now we have more than $1 trillion in available credit left under the previous debt ceiling.” But I don’t know enough about the complex legalities involved in when debt is considered retired or not.

17

Sean Wilentz of Princeton University begs to differ:

18

Let’s just call a spade a spade: not to do a Bricker imitation here, but it is laughable to see so many calls on this message board, and some in public, for the President to be totally able to ignore the plain text of the Constitution today, when just a few short years ago, there was widespread panic in the same corners about the dangers of the “unitary executive” and “signing statements.”

Sean Wilentz is precisely guilty of this: he heavily criticized the over-broad reading of the commander in chief clause back then, and now argues that the President can seize congressional powers to avoid a national emergency despite there not being a single word in the Constitution linking the President to the issuance of debt.

19

Yep, there’s definitely alternative arguments. Mine is based on what has actually been the case (the President never in history unilaterally issuing debt), and the other is based on a highly speculative but still well thought out reasoning. But I will always go with what has actually happened over what people speculate can happen.

That being said, I wouldn’t be entirely opposed to the President doing something unconstitutional to prevent us from defaulting. I don’t actually view the constitution as all that sacrosanct, I actually wish we could hold a constitutional convention and rewrite it from the ground up. But anyway, as Lincoln understood a constitution is important, but sometimes other things are far more important.

I do not think it will happen in fact, but I could definitely see a situation where the President asserts some “implied” grant from Congress to issue more debt. From there, the interest on our bonds continue to be paid and so does everything else that has been duly appropriated. Meanwhile it gets litigated out in the courts. I suspect that a political resolution will predate the courts settling the matter. By the time the courts get to a point where the SCOTUS makes a definitive ruling, the crisis will be over. I suspect given the makeup of the court and the plain reading of the constitution, and the precedent, that they rule the President explicitly cannot issue debt. But then they say that “as a fait accompli, we cannot declare invalid the debt he has already issued, as we cannot question the validity of the debt.”

That leaves us in a place where the President has been acknowledged as having acted unconstitutionally, but where the Supreme Court doesn’t really do much about it. I suspect that would make it politically even more difficult for future Presidents to utilize such a mechanism, since the SCOTUS will have explicitly ruled it unconstitutional–but it will always sort of exist out there as an extraordinary power the President could use.

But I think that path is fraught with political and legal peril, and for that reason the President won’t go in that direction, so I doubt we’ll ever see how it would actually play out. The gravest danger would be the President does this and the SCOTUS ultimately rules all of the bonds issued without Congressional approval were never legal debt at all, so they aren’t “debt” of the United States, and thus not only can they be “questioned” they can be regarded as “nothing” since “debt of the United States” is legally defined as congressionally approved debt issues. That would be bad, because then you’d have bond holders of those issues who immediately realize a 100% loss on their investment which would most likely have very bad consequences in terms of respect for the full faith and credit of the United States government.

20

And, of ourse, we’ve been there done that the last time we had a debt ceiling crisis.