In a sign of Washington’s increasing
desperation over the debt-limit impasse, some Democrats are
advancing the breathtaking argument that the limit itself is
unconstitutional.
These journalists, academics and politicians say if
Congress fails to increase the debt ceiling, President Barack Obama should invoke the 14th Amendment to carry on borrowing
just as though Congress had increased it.
They also say Republican legislators would have no power to
stop Obama, because the courts would not recognize any injury
they could sue him for.
This theory is, perhaps, the perfect distillation of
liberals’ yearning for a magical and painless escape from
reality.
Some of them seem to believe that the government can simply
keep spending beyond its means forever with no negative
consequences. More of them wish that the 2010 elections had not
gone so well for the Republicans and that conservatives, with
their anti-tax obduracy, could be denied the enormous leverage
the election gave them over fiscal policy. That way, Democrats
could continue working on a new New Deal.
In fact, the 14th Amendment does have a bearing on the
debt-ceiling debate, but it’s the opposite of what these
advocates of presidential spending power are saying.
Default Unconstitutional
The fourth section of the amendment stipulates that “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.”
This language does indeed make default on the national debt
unconstitutional. But that doesn’t mean the federal government
has to be able to borrow additional money. It means it has to
dedicate its existing money to paying its debt-service
obligations first.
For months, Republicans such as Senator Pat Toomey of
Pennsylvania have been saying that Congress should pass
legislation clarifying that in the event that the federal
government runs up against its debt limit it must prioritize the
repayment of creditors. One plausible reading of the 14th
Amendment is that such legislation is unnecessary because the
Constitution already commands that prioritization.
Don’t be misled by the amendment’s reference to “pensions,”
by the way, into thinking that paying Social Security checks is
also a constitutional command. The Supreme Court has ruled (in
Flemming v. Nestor, 1960) that the program’s payouts are not a
contractual obligation. It’s a tax-and-spending program that
bears some resemblance to a pension.
Drastic Spending Cuts
The fact that default isn’t an option doesn’t mean Congress
can leave the debt ceiling unchanged without cost. Refusing to
raise it means forcing the budget into immediate balance in the
middle of a weak economic recovery. The spending cuts would be
drastic and painful.
For that reason, Republicans in Congress would probably
raise the ceiling before too long. But even a temporary and
partial government shutdown brought about by partisan
brinkmanship may very well increase fears of a future default,
and thus increase interest rates and weaken the currency.
Presumably this is why Treasury Secretary Timothy Geithner
dismisses the Toomey solution.
But it would also be risky for Obama to decide that the
14th Amendment grants him an unlimited power to borrow that
almost nobody has previously perceived.
For one thing, opponents would have some legal options. The
threat of litigation over the worth of any new Treasury bonds
issued in this way would make investors leery of buying them.
Remember, the amendment says debts “authorized by law” are
unquestionably valid. Congress would not have authorized these
bonds.
Banana-Republic Feel
The banana-republic feel of the whole thing -- the
advocates of presidential borrowing power are, after all, mere
inches away from announcing that the president has previously
unsuspected powers to impose taxes unilaterally as well -- would
endanger confidence in America’s credit. That effect would be
compounded if, as is likely, Republicans reacted to Obama’s
actions by beginning impeachment proceedings.
Although the argument that the debt ceiling is
unconstitutional is weak, there is a reasonable case that having
one is a bad idea. Most countries don’t. It’s a little peculiar
for the government to set spending and taxing levels that imply
an increasing debt and then hold a separate vote to ratify that
implication. The drawback to having a debt ceiling is that
hitting it can yield an unnecessary fiscal and economic crisis.
The upside of a ceiling is that the political difficulty of
increasing it at a time of high public concern about deficits
could provide leverage for needed budget reforms.
A Smaller Deal
Leaks to the news media suggest that some budget
negotiators, including Obama, want a $4 trillion deficit-
reduction package as part of the deal. That seems unlikely.
Republicans will not accept a net tax increase as part of the
deal, and Democrats won’t go for spending cuts of that
magnitude.
But a smaller deal, say one of $2 trillion in spending cuts
over 10 years, might be feasible. Such a deal could start with
the Medicare legislation proposed by Republican Senator Tom Coburn and independent Senator Joe Lieberman. That package of
cuts reduces costs without following Republican Representative
Paul Ryan’s proposal to replace the program with subsidized
private insurance, which would be a deal-breaker for Democrats.
It could also include an end to the tax expenditures --
such as subsidies for energy companies -- that Obama has
recently been denouncing, with corporate tax rates reduced to
match (a formula that former President Bill Clinton and other
Democrats have endorsed).
That’s the best-case scenario for the outcome of this
year’s budget drama. And it’s a deal along these lines, not
fanciful constitutional theories, that Washington ought to be
seeking.
(Ramesh Ponnuru is a senior editor at National Review and a
Bloomberg View columnist. The opinions expressed are his own.)