The validity of the public debt of the United States, authorized by law ... shall not be questioned.This sounds a lot like it means something like a statutory debt limit is invalid. Now, sure, we can quibble about whether it means exactly that, but it's a plausible argument that it means that. This is a strategy that's gaining traction among liberals, including pundits and Senators; if the Administration is considering using this option, just declaring that the debt limit doesn't exist so Republicans trying to use it as leverage can eff off, it's kind of a big deal. So, let's consider the various ramifications of using this tactic.
First of all, the policy. Ezra Klein says he thinks this option is a bad idea, while most of the other pundits I read think it's a good idea. I think Matt Yglesias has it right: now that we've crossed this Rubicon and the debt limit is being used to extract policy concessions, given that this game of brinksmanship and hostage-taking will be repeated from here to eternity unless something changes, there are only three ways this ends. First, and most hopefully, Congress could eventually decide to ditch the debt ceiling; unfortunately, this is also by far the least likely option. Second option, eventually the opposing sides in this game of perpetual iterated chicken can't come together on a deal, and we hit default. Door number three, some President eventually decides to break out the 14th Amendment and blow up the debt ceiling, Congress be damned. Whether or not Obama and Boehner hammer out a deal this time (which will be awful on the policy merits) doesn't change the fact that these are the only options for the end game, whenever we reach that end game. And a constitutional option sounds a lot better to me than a debt default. If Obama can get away with this, in other words, it feels like the best of all possible worlds at this point.
The second thing to consider is how this decision would play out in the courts. This is kind of unclear, on several levels. First, who the hell has standing? Maybe Congress, but Congressional standing is murky and unclear; some random handful of Congresspersons who decide to sue do not, I believe, have it. I doubt even the House of Representatives as an institution would have standing, since one House of Congress by itself does not exist. The other option, the only other people dealt any particular injury by this non-default, are people holding credit default swaps on American government debt. People shorting the U.S. Government. Vulture financiers hovering over the staggering figure of the United States Treasury. In other words, the Least Sympathetic Plaintiffs Ever. I still think it would be tricky for them to argue standing, since I doubt they have any legal right for the government to default on its debt. The Government doesn't owe these people anything, after all. Then there's the question of what the Supreme Court would do even if somebody could get the case in the door. My hunch is that Scalia and Thomas might be willing to side against the Administration on hardliner originalist/anti-consequentialist grounds, but the Big Business Conservatives on the Court, mainly Roberts and Alito, would be reluctant to throw the world economy into a tailspin needlessly. After all, ordering Treasury to default on debt is a pretty radical step for the Court to take, and I doubt it would need much convincing not to do that.*
(*Incidentally, this is how paper money got its toe in the door. We printed it during the Civil War, then later Congress started doing it, and by the time it got to the Court it was clear to all that declaring greenbacks unconstitutional would be a calamity. The Court basically waved its hands in the air and said, look, we're just not going to do that.)
So it would be good policy and the courts would be unlikely to overturn the decision. What's left to worry about? Well, there are two other correction mechanisms in the U.S. government besides the courts: elections and impeachment. These relate to each other. For Obama to do this he probably needs to believe that it will benefit his re-election chances. If I'm right that it would be good economic policy, and paired with avoiding the catastrophic "deal" with Republicans I think I probably am, then just like any other economic boost it ought to help Obama at the polls, as he's the incumbent. But there will also be a political firestorm ignited instantaneously if he makes this bold maneuver, and he'll probably need to think he can win that as well to believe that it will benefit him. One way that battle could play out is that Republicans get up and say mean things about him, he gets up and says mean things about them, and everyone forgets about it within a week.
But there's another potential path: the Republicans could impeach him. I already feel it's a little weird they haven't found something to impeach him over by now, and I'm pretty certain they would really, really want to if he pulled this stunt. I think if Boehner wants to run an impeachment play, he can get it through the House; it would then go to the Senate, which would conduct a circus of a trial where 53 of the 34 Senators Obama needs for an acquittal would be certain to vote in his favor from the beginning. The most recent example we have of Republicans sending an impeachment of a Democratic President to a Senate where it rather obviously failed to remove him ended with the President the fairly decisive victor politically. It's tempting, therefore, to assume that this impeachment would be a losing play for the Republicans. I'm not so sure, though, because there is a difference between impeaching the President because he had sex and impeaching the President because you think he's violating the Constitution. The latter is kind of the exact right thing to impeach the President for, even if Republicans are wrong on the merits in this instance. Now, impeaching the President because he insists on keeping America's credit score perfect is a little different still, but I do think the outcome of this fight is a little bit murky.
This means, I think, that there ought to be some genuine reluctance on Obama's part to do this. Getting your name on the list of impeached Presidents is not something to trigger lightly. Now, if Republicans believe fairly strongly that they would lose that impeachment fight, helping Obama's re-election effort, they might manage to control their impulses well enough to not do it. But I think self-control isn't exactly the most familiar thing to House Republicans right now, and they might blunder into it even if it's a big ol' trap. But still, even if Obama might lose that confrontation or if he doesn't want to be Barack Obama, D-Impeached, I think that this scenario almost certainly plays out as the best for him of any currently available. Here's hoping Geithner is signaling the Administration's true intentions on this issue.
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