With debt ceiling negotiations apparently dead in the water and the August 2nd deadline fast approaching, those hoping to prevent the potentially devastating consequences of a default have started to look for alternative ways to solve what has become an entrenched partisan battle. So far, the only answers emerging seem to present equally messy constitutional issues.
The current borrowing limit is a result of a 1939 act (The Second Liberty Bond Act) designed to give Treasury more flexibility to manage the country’s finances. Conservatives argue that should the government run out of cash, which is what would happen come August 2nd with no deal, then the Treasury Department can simply prioritize payments and have introduced legislation that clarifies that debt payments be at the top of that priority. In support of this conclusion they cite a 1985 GAO report that “tentatively” suggests Treasury has that power.
These Republicans, like Sen. Pat Toomey (PA) hope this “re-prioritization” can do the less-politically feasible job such as cutting of Social Security and Medicare benefits, ideas a majority of voters squarely oppose but hard-right Republicans adore.
Thank goodness for the 14th Amendment.
Section 4 of the 14th Amendment makes it clear that the United States’ public debt “shall not be questioned,” meaning that public debt (in the form of such things as military pay, veterans benefits and IRS refunds) is guaranteed and insulated from such political hostage-taking. The legislative history of the Amendment reinforces this clear read. The sponsor of the 14th Amendment, Benjamin Wade, was unequivocal that the goal was to remove threats of default on federal debts from partisan bickering.
Reconstructionists worried Southern Democrats would use any future congressional majorities to default on obligations they disliked politically (like slave reparations, for example), so they took, in some measure, federal obligations outside of the scope of congressional authority. More simply, the 14th Amendment was written, and passed, to guard against the exact same thing Congressional Republicans are doing now.
While the 14th Amendment is pretty clear that a forced default could be avoided by the executive branch stepping in and simply ignoring the limit, that answer raises a sticky separation of powers issue since the executive is also obligated to make sure the laws are faithfully executed, including the 1939 act setting the debt limit.
Does the 14th Amendment authorize the Obama administration to ignore the 1939 act and if so, will they invoke such power? The answer to the first question seems to be likely yes, while the second is much murkier. Should they take such a position it is all but guaranteed the issue will find its way to the Supreme Court, an outcome neither the administration nor Congressional Republicans, despite their posturing, likely want.
photo courtesy of Thorne Enterprises via Flickr