In 2013, the Republican House majority announced that it would block an increase in the statutory limit on the national debt unless the Democratically controlled Senate and President Barack Obama agreed to steep spending cuts of the House GOP’s choosing. Had the House Republicans not blinked, the result would have been a default on the national debt, likely a catastrophic shock to an economy that had barely begun to recover from the financial crisis of 2008.
A last-minute compromise averted that disaster. But in less than two months, another new Republican majority will take over the House, and this time, it seems, No More Mr. Nice Guy.
I can only hope that the White House is ready with a not-nice response.
During the short periods over the past decade when default seemed genuinely possible, a seemingly fringy constitutional idea about how to deal with it (an idea I had been among the first to propose) journeyed like a comet from the dark reaches of space into the very center of the national debate.
Here’s the argument: The Constitution’s text bars the federal government from defaulting on the debt—even a little, even for a short while. There’s a case to be made that if Congress decides to default on the debt, the president has the power and the obligation to pay it without congressional permission, even if that requires borrowing more money to do so. The result would be a constitutional crisis—Article I is pretty clear that borrowing and repaying indebtedness are congressional, not executive, powers—but a constitutional showdown may be preferable to an economic collapse.
What is the “debt ceiling”? It is a statute passed in 1917 that authorizes the U.S. Treasury to borrow money to pay the government’s expenses. From that description, one might be fooled into thinking that it constitutes either an authorization to fund government programs or an actual limit on government spending.
Don’t be fooled. It is a lingering land mine that threatens to blow us all to smithereens. Here’s how the budget works: Congress authorizes spending through its appropriations power. If tax revenues don’t cover that spending, the Treasury borrows money from bond buyers to pay the authorized expenses.
Much of what the Treasury pays is interest on earlier debt borrowed to pay for earlier appropriations—or for so-called entitlement programs like Social Security, which by law have to pay any eligible recipient and must be funded each year without a formal appropriation. So the level of debt set by the ceiling bears no relation to the level of spending set by appropriations and entitlements.
Washington must make timely interest payments on American debt. Failure to pay bonds, T-bills, and notes in full and on time constitutes default, and wiser economic heads than mine soberly predict that the consequences would be only slightly less catastrophic than the Death Star’s attack on Alderaan. Last year, Moody’s Analytics chief economist Mark Zandi predicted that a default “would wipe out as many as 6 million jobs and erase $15 trillion in household wealth.”
Enter, of all things, the Fourteenth Amendment. Most Americans who know about the Fourteenth Amendment think of it in terms of equal protection of the laws and due process. But those provisions are only part of the first of five sections. Section 4 provides that “the validity of the public debt of the United States … shall not be questioned.”
“Shall not be questioned” is pretty strong language; whatever it means, it doesn’t mean “shall be paid most of the time unless you can score political points against the other party by not paying it.”
Section 4 was included in the amendment because of the dilemma faced by the Republican majority of the 39th Congress in 1866, which has eerie echoes of today’s showdown. It seemed likely that the GOP would lose its majority in one or both houses of Congress at the next election, in 1868. Republicans feared that Democratic majorities might admit senators and representatives from the Confederate states, which were still under the control of their all-white former governments. At that point, the old pro-slavery Democratic Party would be back in power, probably for good.
Southern Democrats, led by the same elite that had engineered secession, quite openly told reporters that they would immediately repudiate the national debt once they regained power in Washington. Virtually all that debt had been amassed since 1861 to fund the war effort. Former Confederates were embittered that Union bonds were being paid while Confederate bonds were worthless. And Union army pensions were being implemented for northern soldiers but not for those who had fought under the Stars and Bars.
Section 4 was passed to prevent a partisan majority from defaulting on the national debt. Under its terms, no future Congress could repudiate the debt. From 1868 until World War I, Congress enacted separate statutes to authorize each new borrowing installment. Still, beginning in 1917, under pressure to raise money quickly to fund U.S. entry into World War I, it authorized an aggregate amount that could be borrowed before a new statute had to be passed.
Today’s Republicans aren’t the first to use this statutory debt ceiling as political performance art. That began in the Eisenhower years. But the early episodes were playacting: The ceiling would approach, and members of Congress would lament the profligacy of the other side and their opponents’ wasteful social progress (GOP talking point) or tax cuts for the wealthy (Democratic point). Eventually, the two sides would agree to cosmetic spending cuts and raise the debt ceiling. After a bit of fiscal Munchausen by proxy, disaster would be averted.
Flash forward to 21st-century Washington and the Republican wrecking crew that took over the House in 2010 and the Senate in 2014. Since 2011, the danger has been very real. Luckily, for much of that time, top Republicans—former House Speaker John Boehner and Senate Republican Leader Mitch McConnell—were, whatever their flaws, denizens of what George Orwell called “the ordinary world where grass is green.” They understood that if Congress threw the world economy against the wall, it might not bounce back, singing, “America is great again!” In 2011, the two parties agreed on the Budget Control Act, which kicked the can down the road to 2013, when congressional Republicans raised the ante by demanding the defunding of the Affordable Care Act as a price for not shattering the world economy. Eventually, that crisis was defused by the adults in the room.
In 2022, however, Republican adults have left the building. Though the new Republican House majority will be slender, that is unlikely to inspire caution. Indeed, it seems likely to empower the Marjorie Taylor Greene/Matt Gaetz wing. As The New York Times reported, some Republican leaders are already demanding that the Biden administration agree to gut Medicare and Social Security as the price of an increase in the ceiling. It’s not clear whether they understand that they are playing with a fire that could scorch the economy back to the depths of the financial crisis.
We won’t be up against this until early next year, according to most estimates—even after the nation hits the debt ceiling, the Treasury can juggle accounts and keep paying bondholders.
There’s a great deal to be done in the lame-duck session. A sane legislative agenda, however, would also include repealing the debt ceiling statute. If Congress can’t agree to repeal the debt ceiling, they need to raise it enough so that Alderaan-level destruction is postponed for years. No party should have periodic opportunities to bankrupt the country in pursuit of policies rejected by voters.
If the 117th Congress bobbles the debt ceiling, expect exorbitant demands from the new Republican House majority. There’s little question that Biden (bless his heart!) will think negotiations can resolve the problem. I tend to doubt that is right.
Needed is Plan B for the president to invoke Section 4 and pay the nation’s debts until Congress regains its senses.
In 2011, the point I and some other scholars made was complicated. The language of Section 4 is unqualified: “Shall not” is sweeping, and “questioned” means arguably that even discussing default violates legislators’ oaths of office. The section is not addressed to any one branch of government—that is, it doesn’t say “Congress shall not” or “the president shall not”; the textual command runs to the entire federal government. In other situations (such as decisions about military action abroad), advocates of executive power have used this kind of textual ambiguity to argue that the executive branch can and should move in when Congress can’t or won’t handle an emergency.
I’ll admit that the argument is open to rebuttal. Spending and borrowing are congressional powers, the counterargument runs, and for the executive to do either without Capitol Hill’s authorization would be to cross a major line. Countering that is the argument that Congress has already authorized the spending and that if federal statutes command certain spending and others forbid paying for it at the same time, they cannot both be observed.
Some fairly big heavyweight legal scholars—Yale’s Jack Balkin, for example, Cornell’s Michael Dorf, and George Washington University’s Neal Buchanan, to name only three—view this as I do; others, including the redoubtable Laurence Tribe of Harvard, disagree.
It’s a jolly constitutional conundrum that’s given rise to marvelous slap fests in dozens of law school faculty lounges. But constitutional analysis is one thing. The brute fact is that the United States might soon find itself, like Wile E. Coyote, with only air under its feet. At that point, it’s not a matter for scholars anymore. When there are two serious interpretations of the Constitution, and when one leads to national disaster and the other might avert it, which one should a serious president take?
A suspension might or might not be good politics; that shouldn’t be the deciding factor. Congress might be about to breach its members’ sworn obligations; that doesn’t relieve Biden from his, which is to save the country until he no longer can.
At another fraught moment in the run-up to the Civil War, Abraham Lincoln ordered federal troops to refuse a writ of habeas corpus issued by the chief justice of the United States in aid of a pro-southern politician. He later asked Congress what he should have done: “Are all the laws, but one, to go unexecuted, and the government itself go to pieces, lest that one be violated?”
The next obstacle is the Supreme Court’s conservative supermajority, which would probably be slavering to humiliate a Democratic president.
At this point, another unpleasant possibility arises. In 1933–34, newly inaugurated President Franklin D. Roosevelt, through a combination of executive actions and statutory change, took the United States off the so-called gold standard. The link between the dollar and gold, Roosevelt concluded, was preventing a healthy inflation that might help lift the nation out of a deadly Depression. No longer could citizens demand that the Treasury give them gold for their dollar bills—and private lenders could no longer require that creditors repay their loans in the value of gold.
Many observers predicted that the Supreme Court would invalidate those measures. Within the White House, FDR and his aides quietly prepared a message to the nation explaining why, as president, Roosevelt would not be bound by an adverse decision by the Court. “To stand idly by and to permit the decision of the Supreme Court to be carried through to its logical, inescapable conclusion would so imperil the economic and political security of this nation that the legislative and executive officers of the Government must look beyond the narrow letter of contractual obligations, so that they may sustain the substance of the promise originally made in accord with the actual intention of the parties,” the message would have said.
In a series of decisions called the Gold Clause Cases, the Supreme Court dodged this confrontation 5–4. The post–Donald Trump Court might not dodge. At that point, the issue would go to the country, as the British say. Win or lose there, Joe Biden would have done his duty.