What Can We Wish Away?

Lawrence Tribe has an article in the New York times titled, "A Debt Ceiling We Can't Wish Away" in which he argues against the theory that the 14th Amendment negates the debt ceiling. First he refers to a 1935 Supreme Court case that declared that the Public Debt Clause of that Amendment only means that Congress cannot "alter or destroy" existing debts. Then he considers and rejects the argument that this means that all actions which make a default more likely are unconstitutional, finding it untenably broad. Then he gets to the meat of the argument: he concedes that while the Public Debt Clause might well mean that an actual default on an actual debt is unconstitutional, this doesn't mean the President has the authority to do whatever it takes to avoid such a default. If he could, Tribe argues, why couldn't he choose to levy a new tax to fund debt obligations, instead of issuing more debt? Or print a bunch more money? The rest of the article is devoted to claiming that using the constitutional option would be a bad thing, and that the Constitution doesn't and shouldn't solve all of our problems.

But there's a problem for all of these arguments that he makes: what on earth is Obama supposed to do?
If we hit the new debt ceiling deadline on August 2nd, or whatever day it ends up being, the number of options left to the President and his various agents is fairly small. The government makes a whole lot of payments every day, and at present the revenues it draws in are enough to cover only about 60% of them without issuing new debt. One option, therefore, is to ignore the debt ceiling and continue to issue more debt. (I've heard it argued that this is almost certain to happen for a while at least, since the computer reprogramming necessary to stop all the payments won't happen overnight.) Another option is to default on large amounts of U.S. government debt. As best I can tell, there is only one other option, namely to cease approximately 40% of the government's outlays. But here's the thing about that: it's illegal! The Social Security Act instructs the executive to issue checks to retirees on a regular basis. The statutes establishing Medicare and Medicaid instruct the executive to pay the medical bills of the elderly and impoverished. Various defense appropriations acts instruct the executive to pay assorted defense contractors. All of these are statutory obligations; if Treasury 'prioritizes' away from making those payments, it will be violating those statutes.

One of Tribe's arguments is that Obama would lack the authority to issue debt lacking Congressional authorization. He references Justice Robert Jackson's argument from the 1952 steel seizure cases that the President's authority is at its "lowest ebb" when he is acting in direct disobedience of a Congressional order. But that's the bizarre thing about the debt ceiling, and it's why we are the only nation on earth that has one: Congress wants multiple different things! It wants X spending, and Y revenue, and not more than Z debt. All three of those numbers are authorized by Congressional statute. But if the government would need more than Z debt in order to issue X in spending while only taking in Y in revenue, what exactly does Congress want? To repeal the laws of arithmetic? Fundamentally that equation needs to be in balance; one way or another, one of those three numbers is going to chance. And unless Congress decides to intervene before then, which is part of the stipulation of our scenario, the one doing the changing will be the President.

All three options that Obama realistically has (levying new taxes, which Tribe mentions as another possible way to pay debts, isn't on the table) share several features: they involve violating Congressional statutes, and they will all inevitably involve making markets much more skittish than they've been previously about U.S. debt. But there are three unique features of the constitutional option that make it attractive. First of all, it's unclear who exactly could object in court or force the Administration to change course. Tribe mentions this as a negative, saying it would contribute to the undermining of confidence in government debt, but it looks to me like it means Obama could get away with it. Second, it's the best intrinsically for the economy; while rates on U.S. debt might go up a little bit, an outright default would more or less destroy the global financial system and massive spending cuts would be massively contractionary. Third, there is a legitimate argument that it is the most legally valid option.

Tribe concedes that an outright default on debt may be impermissible under the Public Debt Clause, and as always it is worse to be unconstitutional than illegal. Stopping, say, Social Security payments, violates the laws in question and therefore the Take Care Clause of the Constitution. But the debt "ceiling" is not really a ceiling. Rather, it is an authorization of debts up to a certain amount, a practice that replace the earlier custom of authorizing each debt issue individually. So yes, Congress has not explicitly authorized debts exceeding $14.3 trillion. But it may have implicitly authorized them, by authorizing spending that exceeds the revenues it has authorized collection of by a certain amount. The way governments usually operate is that they issue debts to cover the difference between revenues and spending; I don't think it's a stretch to infer that Congress has in fact authorized sufficient debts to cover the spending it has called for. That's especially true given that the Constitution explicitly prohibits a default.

I also can't help but notice that Tribe kind of misrepresents the 1935 case he refers to. He says that the case "observed only that the clause confirmed the 'fundamental principle' that Congress may not 'alter or destroy' debts already incurred." What the case actually held was, separately, that Congress is not endowed with the power to alter or destroy debts already incurred and that the 14th Amendment includes debts issued after it was ratified as well as those existing in 1868. The "fundamental principle" line was to emphasize that the principle against default applies to post-war debts as well as the war debts it most explicitly targets. The Court most definitely did not limit the scope of the 14th Amendment in this area.