Tuesday, July 26, 2011

The 14th, Revisited

I haven't written about this recently, so just a reminder:

At some point after August 2, if the debt limit is not raised, the President of the United States will have no choice but to break some law or obligation. Remember, Barack Obama has no legal authority to stop spending money that's duly authorized appropriated by Congress and signed into law. Nor is he allowed to fail to pay contractors who have valid contracts with the government. Nor is he allowed to not pay interest on debts that have been duly authorized, or redeem bonds that come due. And he won't have enough money to do those things, and will not, per the debt limit, be allowed to borrow in order to do so.

That's the context in which "invoking the 14th" (or it's playful cousin, the coin thing) is generally mentioned. Essentially, the problem is that the law (that is, laws passed by Congress and signed by the president) give contradictory instructions: you must spend this much more than you have available, but you're not allowed to borrow to do it. Given that the president must, in that situation, violate the law (or come up with improbable interpretations of the law), better that he do so in best keeping with the spirit of both Congress's most recent actions and, meanwhile, avoid or minimize economic disaster.

Will Obama choose to blow through the debt limit? I have no idea. There are both legal and political risks if he does so; the question is whether those are more, or less, important than the legal and political risks for not doing so.

29 comments:

  1. House will impeach him. Senate probably would not take that bid. What about the Supreme Court? How long the case would run? If they find he did it wrong, there will not be any choice apart from doing Nixon. Even if they do not find him guilty, depending upon how the case runs, what merit would be there for his second term bid? Essentially Obama would have to do it with full understanding of being one termer or not even completing that.

    On the other hand, say he starts stopping payments like Social Security/Medicare and so on. Only the receipt can go to Court I believe. Will GOP Congress go to the court? Moreover, longer that scenario is dragged, more is the pressure going to be build on Congress to get in line. This all would work bit better, if Senate simply stymie and does not take Boehner bill. That way then Obama can say Congress never gave him the bill. Instead he vetoing one will be rather tough to defend when he is going to cut all regular spending.

    I think Dem plan should be very clear - Senate to hold tight and Fed Gov under Obama start boiling the water of Public Anger by closing things. I believe Clinton did the same. After few months, GOP came on the line. It is the same play-book. Why does it need to be changed? Question is will Senate Dems be ready for the 'united Dem' game plan.

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  2. I'm going to repeat here what I said in comments to a previous post, because I think it's equally relevant here:

    Article 1, Section 8 reads (extraneous matter not included):

    "The Congress shall have Power...To borrow Money on the credit of the United States"

    Congress has passed spending and revenue acts that require that the Federal Government operate currently with a budget deficit. Congress has therefore authorized the Executive branch to borrow money on the credit of the United States. At least as far as I'm concerned.

    And the revenue and spending acts are nearer in time than the debt limitation act, and so should be construed to supercede it.

    So I (an economist and definitely not a expert in Constitutional law) see no difficulties...

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  3. And I'll repeat my response:

    The key part of your analysis being "Congress has passed." That doesn't authorize the President to do so unilaterally. Like, at all.

    No one's saying you CAN'T operate with a deficit. It's that the President doesn't get to borrow without Congress' approval. It's that simple.

    The 14th amendment is not intended to modify Article 1, section 8. If it were, it would actually modify it, as all amendments do, by inserting an addendum after it. That's the whole ballgame. If the 14th amendment were meant to override Congress' control over spending, it would say so in the section it's overriding. I don't see any way around this that doesn't involve Mary-Lou Retton-esque mental gymnastics.

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  4. In theory Obama might not even have to actually use the 14th Amendment. He would only have to threaten to do so credibly enough that the House GOP would decide that it would be in their interest to vote for the Reid plan rather than get nothing. That of course would require a level of sanity by the House GOP that they haven't demonstrated to date.

    In any case it would be better for the country to have the President use a novel and debatable Constitutional power than to allow the GOP to drive the world back into a depression. There are many things he has already done (intervention in Libya for instance) that are less grounded in the Constitution than this action would be.

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  5. It is not debatable. It does not modify article 1, section 8. That is not an arguable point, because if it were meant to modify it, it would actually, you know, modify it. It didn't. So the question then is, is default preferable to explicitly violating the Constitution? Uh, yeah, terrible as it is.

    Also, I love how it's just assumed that, because the two parties can't agree, the GOP is "[driving]" us to default. As if Democrats could not compromise on certain points and reduce spending and avoid default.

    And if your way of explaining this assumption is that you think Dems are being more reasonable, congratulations, you've just demonstrated that in every negotiation, political or otherwise, every side thinks it's being the reasonable one.

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  6. Oh, all that said, the idea that he might only have to threaten to use it is a very interesting one. Not in that I like it, but that it might tilt things just enough to stave off default, if indeed we're headed there (I think not, but I guess we'll know soon).

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  7. Anonymous, your analysis begs the question. As the post here explains, the debts to be paid have been incurred with the authority of Congress. So, when a given bond or due bill arrives at the Treasury department asking to be paid, NOT paying it would be just as much a violation of Article 1, Section 8 as paying it -- arguably more so, since the current appropriations were approved by Congress more recently than the last debt limit.

    Given this, any responsible executive will pay. So yes, Obama will "blow through the debt limit" if that's what it comes down to. Even without Article 14 (and especially with it), he can't seriously consider not paying legitimate, Congress-authorized individual debts just because John Boehner is bleating that they don't have a debt-limit agreement yet.

    Now, the House will no doubt make noises about impeaching him for this. His response should be: "Make my day." If they actually did impeach, here's his defense: (a) legally, my oath of office requires me to "take care that the laws be faithfully executed," and that obviously includes paying lawfully incurred debts and carrying out the appropriations that Congress called for; and (b) as a practical matter, doing otherwise would have risked worldwide depression and decades of further bad consequences. That's WAY better than Clinton's defenses when he was impeached, and yet if you'll recall, the public (not to mention the Senate) sided with Clinton. I find it very hard to imagine that they'd side with Boehner and the abstraction of a "debt limit" over Obama and the reality of paying actual debts and preventing depression.

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  8. The cost has been authorized by Congress, of course, but that doesn't mean anything done in the name of paying for that cost comes with implicit Congressional approval. That'd be crazy. You might as well argue that the President is allowed to simply steal to pay for these costs because "either way, he must violate the law."

    Congress' role is not done when it authorizes a cost. It also must authorize debt, if debt is required.

    We've been here before. We had similar levels of debt during the Civil War. Know what we did? We cut spending. Man, if only there were a major political party willing to cut spending to avoid default.

    Even if you somehow ignore all of this, all you're arguing is that Obama is required to pay things off. That in no way argues that he can't sell off reserves or other national assets (we have hundreds of billions in gold, no?). He would not be obligated, even if you blew right by the Constitution, to raise the debt ceiling, specifically.

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  9. Issuing new debt beyond what has been authorized by Congress only works if someone is willing to buy that debt. I'm sure someone would be willing, but at what interest rate? It would have be pretty high to make up for the risk that a court would later declare it a worthless piece of paper. That ends us back where we started, except that Obama has blown his credibility as the "adult in the room" by introducing a novel Constitutional theory, and the bond markets will probably have downgraded even the good debt.

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  10. Anonymous, the Treasury is not going to sell assets and says it wouldn't do much good anyway. They're quoting Ronald Reagan as their authority on this:

    http://www.treasury.gov/connect/blog/Pages/Federal-Asset-Sales-Cannot-Avoid-Need-for-Increase-in-Debt-Limit.aspx

    I'm a little unclear on your constitutional theory, though. You're saying the president needs the approval of Congress to spend or borrow money, but can sell public assets on his own say-so? Really? Like, he could sell Yellowstone Park to the Chinese if he chose to, without getting permission from Congress? I'm no law professor, but that doesn't sound very plausible to me.

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  11. Well, I don't think it'd be desirable or terribly likely, but I think he can.

    I'm far from sure of that, but it's kind of beside the point: you only get to that question if you first disregard everything else. The salient point is that the President does not have implicit Congressional approval to raise the debt ceiling on his own simply because they authorized spending. They must authorize spending and, when that spending means more borrowing beyond the previously established limit, they must authorize borrowing as well. Nothing in the 14th amendment in any way modifies or supersedes the power to spend and borrow vested into Congress in 1-8.

    I'm really not clear on how people are getting around this point. It seems to be based, at best, at a willful misreading of the amendment that ignores how amendments actually modify powers, and at worst the simple, repetitive insistence that it'd just be really bad to default. But of course, we don't get to violate the Constitution just to avoid undesirable outcomes any more than we get to convict a guy who was subjected to unreasonable search and seizure just because we all know he's TOTALLY guilty.

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  12. Anonymous skirts Jonathan's major point:

    "Remember, Barack Obama has no legal authority to stop spending money that's duly authorized appropriated by Congress and signed into law. Nor is he allowed to fail to pay contractors who have valid contracts with the government. Nor is he allowed to not pay interest on debts that have been duly authorized, or redeem bonds that come due. And he won't have enough money to do those things, and will not, per the debt limit, be allowed to borrow in order to do so."

    He can't not spend, he can't refuse to honor obligations, he can't borrow. Something has to give. Point taken that perhaps he could sell the gold reserve, but that would not be sustainable.

    Since he has to choose to break the rules somewhere, why not break them by borrowing more? JB is not arguing that is authorized, he is saying that circumstances force some rule to be broken, and as Chief Executive that decision will be Obama's unless Congress opens a legal path.

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  13. And you don't think we could sell, oh, that's right some of $1 trillion in oil reserves. Or that $1 trillion sitting in the Federal Reserve.

    Just like a family, when you max out the credit cards, you have other options. Our includes pointing a gun at the Japanese and telling them buy stuff.

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  14. I don't think it's skirted: I'm simply pointing out that it's Congress' responsibility. Jonathan says "he" can't refuse to do that, as if it's his responsibility in the first place. If it isn't, then "he" isn't doing anything.

    The fact that selling gold reserves would not be a long-term solution in no way invalidates it as a temporary one. If you're making the argument that Obama might be FORCED to break some law, then you'd at least have to concede that doing so would be done only out of necessity, which means as a last resort. That last resort will certainly not have been reached if he hasn't even touched the gold reserves.

    But above all, this argument equates having no options he LIKES with having no options at all. The fact that he doesn't want certain levels of spending cuts, or cuts without raising taxes, doesn't mean he has no choice. It means he doesn't like the choice that will stop him from having to break the law. So the argument isn't even "The President has to break the law, so it's okay to break this law," it's actually "The President should break the law instead of accept these terms for raising the debt ceiling that he doesn't like."

    So, he doesn't have the authority, period, and there are multiple options (though none which he likes) which allow him to avoid defaulting or breaking any laws. I don't see how one can seriously make the case, then, that he'll be backed into some legal stalemate.

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  15. Anon,

    I'm not really sure what authority the president has to sell US assets without Congressional approval. My guess would be: some, but limited. OTOH, those who have looked into it say that the coin thing is at least plausibly legit, so there's that, too.

    But as far as spending cuts: there is, to date, nothing for the president to agree to. There is no bill, to date, that has passed the House that would increase the debt limit. That may change tomorrow, but my money (FWIW) is against it.

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  16. You don't' need to sell anything.

    Have the fed sell the 1.5T it already owes. Temporality move the gold and oil into the fed's account, then pay it back. Done.

    The 1.5T is already being counted against the debt limit.

    If you're really smart, you'd have the fed buy up every security that is expiring in the next three months then rip them up.

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  17. @Jonathan. So, if the House passes a bill that increases the debt limit, even if it heavily cut programs Obama would like to preserve, every defense you're offering about the 14th amendment is rendered null and void? Is the entire preemptive defense based on that?

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  18. The debt ceiling authorization is a dead letter, superseded by subsequent spending bills. That anyone hasn't tested this yet is basically cause nobody wanted to find out what would happen if we did. It didn't matter. Now somebody is using this as a bargaining chip and, well, I think the president is obligated to test it.

    If the Congress cannot come to an agreement as to fix the inconsistencies among the spending bills and various portions of the Constitution and Amendments and get a bill to the President, the most recent bill (the spending bill) supersedes the debt ceiling bill. The most recent bill, even if it does not explicitly amend the older bill, becomes and amendment of the older bill if they are in contention. It's the Congresses responsibility to make legislation that is consistent with previous legislation. They haven't done that.

    The case law on this is pretty clear.

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  19. I'm talking about Constitutional amendments, not amendments to legislation.

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  20. Anon: I simply can't buy your argument (never mind the politics/ideology stuff, which is really besides the point in what is mostly a legal debate here). The current debt limit ceiling was passed into law before the current budget laws. It seems very logical to me that, when laws conflict, if both laws are Constitutional in their own rights (that is, independent of the other), then the law passed last is the legal authority. Congress said that the US government would provide SocSec, and defense, and low taxes, and the EPA, and all the other stuff.

    There really is a constitutional question at the heart of this debate: is a law passed that fails to correctly amend all the parts of the existing US code as necessary for its implementation legal? Or, is the new law the new US code in these matters? Or what?

    I wouldn't mind hearing from a Const. scholar on this one.

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  21. For what it's worth, I found this law prof who says that they'd have to sell all liquid assets first:
    http://live.washingtonpost.com/14th-Amendment-debt-ceiling-chat.html

    He also argues that the payment order would go debts > programs, because impoundment is a statutory violation. Not sure on that one, I thought it was ruled unconstitutional repeatedly before the 1974 Budget Act passed.

    Finally, he concedes that "printing money" is also a potential solution.

    Anyway, I'm not sure he's right, but it's interesting to see what people who know more than I do are thinking.

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  22. I should have said "repeal", not amend. It's an old principle. The current intent of Congress, as explained in the bills that have legislated spending is that these spending obligations be met. That supersedes a previous law that is in contention with the current intent of Congress (having been passed by a previous Congress). They have the responsibility to clear this up.

    Barring that, the President is obligated (in my opinion, and well, history and case law) to follow the current intent of Congress, which is to pay the debt obligations. Furthermore, the Constitution mandates (as per the 14th Amendment) that the "The validity of the public debt of the United States, authorized by law...shall not be questioned." I don't think there's any question that the President is obligated to follow the current intent of Congress, which is, oddly enough, mandated by the Constitution (as per the Amendment).

    Again, it is not the President's responsibility to clear up the contradictions in law, it's the Congress's. They have failed to do that. In that case, the President is obligated to take reasonable measures to follow the law. Congressional intent, in particular the current Congress, being a very important test, in this case, seems to be that the debts be paid, not that the US default. It's not even really a question of the Constitution per se. Except that the 14th Amendment seems to tell us that the debts be paid. That's a reasonable, and honestly, Constitutional option.

    And, if you read the history of the drafting of that Amendment, it becomes quite clear what the drafters wanted, which was to avoid people playing politics with the national debt. Which, oddly enough, is what is happening right now.

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  23. Furthermore, I think it's also reasonable to assume that the current intent of Congress (which is always only limited to bills passed, not bills being discussed) is that the US take on more debt to pay the bills. It was discussed when the bill was discussed. The legislation did not mandate that the US not take on more debt to pay its obligations. It was assumed (by everybody, really) that the debt limit would be raised. Just because a minority of the current congress wants to default, doesn't mean we should default. It's what bills have been passed, but bills under discussion, that determine Congressional intent.

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  24. That should read "not bills under discussion." That law determines intent.

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  25. This has all become kind of a dorm-room bull-session debate. It has no bearing that I can see on what's going to happen. Imagine how Eric Cantor and the Tea Partiers would react if Barack Obama started selling off gold or other public assets. Would they sit there calmly and say, "Ah, very good, at last the president is carrying out our will"? No, they'll try to impeach him for THAT. I mean, get real.

    So, given that the legal rules are arguable, that he's got both a statutory principle and a Contitutional provision he can point to on his side, and that the crazies are going to scream no matter what he does, there is no way that Barack Obama (or Timothy Geithner) will just sit on his hands while lawful U.S. debts go unpaid and a government with 220 years of good credit defaults, risking a possible global depression. I'll bet a Confederate dollar that the Treasury will still be paying bills on Aug. 3 regardless of what Congress does.

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  26. All this talk about the 14th overlooks the near certainty that the bond agencies are going to downgrade our debt if there isn't some resolution. And if there's no deal, the stock markets will be soon to follow.

    Now if *after this happens Congress still refuses to act? Go ahead, it would be better to keep money in the economy than not - but if we ever get to the point where this idea comes into play, (as Bender would say) we're boned.

    And that's why Obama is doing all he can to communicate that the 14th Amendment is not an option.

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  27. JS & Jeff: good point. Really, waht is legal after all this falls apart is kind of beside the point. But, unless the House Dems fall on their swords and rescue Boehner by voting for something they would fundamentally oppose, I'm having trouble seeing the votes for ANYTHING.

    So, in some sense, it becomes a valid question: "how would you like the Titanic deck chairs arranged?"

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  28. @phat. You point out that the 14th amendment says that the public debt, "authorized by law," shall not be questioned. The important part is in quotes. Authorizing the spending is not the same as authorizing the debt. If it were meant to conflate the two, it would say so, either explicitly or by amending 1-8 or something of the sort. It just doesn't do that. There's no reason to lump legislation that approves spending in with raising the debt ceiling.

    And yes, by all means, let's look at the history of the amendment. It was one of the Reconstruction Amendments, and it was added because the Confederacy was worried that it it would have to pay for all the war debt used to defeat them. The 14th amendment was designed, among other things, to preempt those arguments and ensure that the debt go unquestioned on those grounds.

    At BEST, you have an amednment which is vague, up against one which is completely explicit and unquestioned. And I think even that is being awfully generous. If the 14th amendment were meant to modify Congressional powers on borrowing, it would actually do so. It doesn't, so it doesn't. It takes a lot of contortion and more than a few incredibly convenient assumptions to even make a semi-plausible case otherwise.

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  29. @Jeff. Just because you don't give a damn whether or not something is Constitutional, and only whether or not someone can get away with it, is no reason to expect others to feel the same way. The very notion is terrible, so the least you can do is not try to foist it on others. Thanks.

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