A Biden strategy to get debt ceiling ruled unconstitutional
By Miles Mogulescu
This is a proposal to the Biden administration on how it might get the debt ceilinglaw declared unconstitutional by a federal court before the likely default date in June.
It’s not hyperbolic to say that congressional Republicans are engaging in economic terrorism. They’ve taken the U.S. and global economy hostage and threatened to shoot it if President Joe Biden doesn’t pay a ransom of cutting spending that Congress has already appropriated. Even if Biden wanted to negotiate with these terrorists, he wouldn’t know how, since they won’t even specify what the ransom is or what cuts would satisfy them. And that’s because if they do specify the ransom, to be meaningful it would be politically unpopular because it would have to cut popular domestic programs—including Social Security and Medicare–and defund part of the military to make a material difference to the national debt.
Biden has rightly said that he won’t negotiate with the hostage-takers. But the Republicans have become even more reckless and extremist than in past debt ceiling crises and seem prepared to send the global economy over the financial cliff. In contrast, Biden and congressional Democrats care about a functioning government and the national economy, so when it comes close to “D[efault]-Day,” there’s a real danger they’ll cave and pay a ransom that would hurt ordinary Americans and encourage future hostage-taking.
Why the Debt Ceiling Is Unconstitutional
The best strategy is to get a federal court to declare the debt ceiling unconstitutional and for the administration to issue new debt as necessary to pay the government’s bills. Over the past week, I’ve been in dialogue with some of the country’s most respected constitutional scholars including Laurence Tribe, Erwin Chermerinsky, Neil H. Buchanan, and Michael Dorf. They all agree that the debt ceiling law is unconstitutional.
As a matter of Constitutional law, the president has the right to prevent the Republican Congress from questioning the national debt and to issue new bonds to prevent default.
Even Professor Tribe, who during the 2011 debt ceiling stand-off between President Obama and Speaker Biden was skeptical that the Constitution provided an off-ramp, has now written to me directly that he’s “long since rethought and revised” this view. He tweeted: “Some of history’s greatest lessons echo the words of Amazing Grace: ‘We once were blind but now we see.'” In another tweet, he eviscerated the constitutionality of the debt ceiling law: “The debt ceiling is a misnomer: it does nothing to cap spending but just creates and illusory threat to stiff our creditors. That’s because Section 4 of the 14th Amendment forbids defaulting on the nation’s debts.”
Section 4 of the 14th Amendment states in plain language: “The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
As Professor Eric Foner, America’s leading historian of Reconstruction, has argued in the New York Times, the original intent of this Amendment was to prevent former insurrectionist Confederate leaders who might be elected to Congress from repudiating all or part of the Federal government’s debt from the Civil War while honoring the Confederate debt (which was specifically prohibited.)
As Foner writes, “the amendment’s language is mandatory, not permissive — the validity of the public debt ‘shall not be questioned.’ Today, over a century and a half after the amendment’s ratification, this promise is no longer considered an ‘extraordinary guarantee’; it is an essential attribute of a modern economy.”
In its only decision regarding this constitutional clause, Perry v. United States (1935) the Supreme Court stated: “While this provision was undoubtedly inspired by the desire to put beyond question the obligations of the Government issued during the Civil War, its language indicates a broader connotation. We regard it as confirmatory of a fundamental principle, which applies as well to the government bonds in question, and to others duly authorized by the Congress, as to those issued before the Amendment was adopted. Nor can we perceive any reason for not considering the expression ‘the validity of the public debt’ as embracing what- ever concerns the integrity of the public obligations.” (emphasis added)
The question is: How can President Biden implement this Constitutional mandate and issue new debt to meet the government’s financial obligations if the default date is reached and Congressional Republicans refuse to raise the debt ceiling, thrusting the national and global economy into a profound crisis?
Foner proposes that “if the current House of Representatives abdicates this responsibility, throwing the nation into default by refusing to raise the debt limit, President Biden should act on his own, taking steps to ensure that the federal government meets its financial obligations, as the Constitution requires.”
As a matter of Constitutional law, the president has the right to prevent the Republican Congress from questioning the national debt and to issue new bonds to prevent default. In 2011, former President Bill Clinton advised then President Barack Obama to use his constitutional powers to raise the nation’s legal borrowing limit on his own if he had to and “force the courts to stop [him’]” in order to prevent the United States from defaulting on its debt obligations for the first time in history. Obama instead sent then-Vice-President Biden to negotiate a deal with then-House Speaker Boehner that hamstrung the federal budget and slowed recovery from the 2008 financial crisis.
In any case, while legally correct, the problem with this strategy is that financial markets would likely reject these bonds, or require much higher interest rates because they would be deterred by the risk that the Supreme Court could conceivably overturn the President’s action in the future. In the end, a financial crisis would occur anyway.
The only way to avoid this is to get a ruling from a federal court that the debt ceiling law is unconstitutional before the drop-dead date.
Ideally, the Biden administration would file an emergency petition with the Supreme Court asking SCOTUS for a declaratory judgement that debt ceiling law is unconstitutional. Unfortunately, there is no constitutional procedure to ask SCOTUS directly for a ruling since the administration wouldn’t be suing anyone in particular and there would be no case in controversy with an actual opposing party so the case wouldn’t fall under SCOTUS’s Article III original jurisdiction.
A Strategy for Getting a Federal Court Ruling Before the Default Date
So here’s an alternative strategy to get the issue into federal court before the drop-dead date: President Biden and Treasury Secretary Yellen should publicly announce now that they plan to continue issuing new Treasury bonds in the normal course in the amounts and on the schedule that debt becomes due despite extraordinary measures. Republicans would almost certainly find a party to sue the administration in federal court to block these plans.
There would then be an actual case in controversy that courts could adjudicate. There is a chance that a court could find that the Republican plaintiff lacks standing to bring the case. But standing can be a malleable standard and courts often bend over backward to grant standing when they really want to hear a case. As legal commentator Mark Joseph Stern has previously argued in Slate, “certain key circuit courts and the Supreme Court seem to follow one standing rule: When a majority wants to decide a case on the merits, they find some justification to grant standing; when it doesn’t, they don’t.” The Republicans would probably forum shop for a district court—say in Texas—that would accept the case. If that court issued a ruling against the administration, the administration could then file a petition with SCOTUS for an emergency appeal.
There is, of course, no guarantee that a lower federal court or SCOTUS would rule in the administration’s favor. While they call themselves “textualists” and “originalists” the right-wing Supreme Court majority is increasingly results-oriented and finds whatever text or historical meaning they can conjure up to rule the way they want to. But it’s at least possible that even this right-wing court wouldn’t be aligned with House Republicans in allowing a default on the national debt. As argued above, the text of the 14th Amendment is quite clear-: “The validity of the public debt of the United States, authorized by law… shall not be questioned.” And as leading historian Eric Foner explained, the original intent of the Amendment was “mandatory” and prohibited the questioning of all legally authorized federal debt.
And perhaps the Justices’ own self-interest would incline at least two of the conservatives to join with the liberals in finding the debt ceiling unconstitutional. After all, the Justices all have investment portfolios and their salaries and pensions are paid by Treasury, all of which would be jeopardized by a default.
If, as it should, a federal court ruled before the drop debt date that the debt ceiling is unconstitutional, it would end once and for all the charade of a potential government default which would jeopardize the national and global economy. And even if the court ruled to the contrary, we would be no worse off than present, when markets assume the debt ceiling is legal and Biden will avoid default by making a deal with McCarthy.
What’s to lose by the Biden administration giving this strategy a try?