The establishment view of the options available for resolving the debt limit issue is presented today in all its glory in an article listing Six Possible Paths Ahead in the Debt-Ceiling Debate: the Boehner House Bill, the Reid Senate Bill, a conference committee's amalgamation of the two, back to a grand bargain, no deal (leading to default), and some combination of the above.
Of course, as Yves Smith's video (already posted here several times and embedded again over the fold) notes, there is a seventh option: unilateral action by the President to order that debts be paid notwithstanding Congress's failure to raise the debt limit. Smith lists several such unilateral actions (the "platinum trillion-dollar coin," cancellation of debts to the Fed itself) that the Administration could take; personally, I find them plausible but conceptually unsatisfying. What we want to know is whether the President is entitled to ignore the debt ceiling, not just whether he can technically get away with it. I've been kicking around an idea this month and it's time to show it the light.
Yes, I argue, the President has the right to ignore the presence of a debt ceiling because when Congress appropriates money that carries with it an implicit permission to spend the money, making raising the debt ceiling a ministerial action that can be taken by the executive. That's old news.
So far, that has been argued to be a function of the 14th Amendment or of various existing Presidential powers, as I'll review. The novel (to my knowledge) contribution that I have to offer here is that you can see that this is true by looking at the operation of the absolute highest governing law of the land (with the possible exception of the last clause of Article V): the most recent amendment to the U.S. Constitution.
The 27th Amendment shows us how Congressional appropriations are supposed to work. If they worked in a way that allowed a debt limit to cut all expenditures, the 27th Amendment would not make sense.
First of all, for those of you who haven't seen it, here is Yves Smith's video talking about (among other things) the President's power to engage in unilateral action to get around the debt ceiling. This is not the primary point of the diary, but it's good for people to note. This clip has led to some controversy because it contains a clip from Blazing Saddles, and all I can say is that I urge you not to let Mel Brooks destroy our democracy. Comment on it below -- way below -- if you must.
The Problem with Unilateral Action
The second-biggest problem with unilateral action is that President Obama doesn't want to do it. He wants as big a deal as possible to reduce the debt limit, and such a major policy change can only be justified (if against the popular will -- which it is) if it's the only way available to resolve a crisis. Happily for us, the President has done such an aggressive job of being reasonable that perhaps his appearing on TV next Monday, taking a deep breath, and saying "I know that this is controversial, but I'm simply not going to allow the nation to default" would further burnish his reputation.
The reason the President would deserve some credit for doing is is that due to the first-biggest problem with unilateral action: he would likely be impeached over it. That is the Republicans' trump card. He won't be removed from office, most likely, even if he uses constitutionally questionable means to "fight this fire," but he will be sullied as a "would-be dictator" and it could damage his re-election. (It could also pretty much assure it; it really depends on how strong the Constitutional arguments allowing such an action turn out to be. That is what this diary is about.)
A variety of smart and perceptive critics have argued that the President does not have the power under the 14th Amendment to simply ignore the debt limit. At the beginning of this month, our Gary Norton wrote a provocative diary sounding the alarm against the theory presented by Sen. Schumer among others, suggesting that President Obama can just declare that Section 4 of the 14th Amendment does not allow Congress to fail to extend the debt limit to cover items that have already been appropriated. Talking Points Memo provided its own pessimistic analysis a few days later.
Our FleetAdmiralJ wrote a really interesting diary that same day also taking on the 14th Amendment (see the comments for a discussion of and links regarding "jumbo coin seigniorage," the preposterous-sounding but perhaps not entirely mad platinum coin idea, as well.) He argues that the combination of Article I, Section 8, Clause 2 (giving Congress the power to "borrow money on the credit of the United States") and Article I, Section 9, Clause 7 ("No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law") implicitly grants the President the power to ignore the debt limit:
[C]onsider the following: Does it make sense for Congress to be able to pass a budget with deficit spending on the one hand, but then refuse to actually authorize the borrowing needed to fund that same budget on the other hand?
... [T]he power to appropriate in conjunction with the power to borrow would seem to create the situation where by the very act of passing an unbalanced budget, Congress implicitly authorizes the borrowing authority required to pay for that budget.
Indeed, up until the 1920s and 1930s, the Congress extended new borrowing authority as needed as part of each budget. The borrowing authority and the budget were ultimately separated in the 1930s in order to give the Treasury Department more flexibility, with the debt ceiling as we know it being created in 1939.
Normally, extending the debt ceiling has required a separate vote in Congress. However, again, it would appear to be inconsistent that Congress could authorize deficit spending in a budget, but then refuse to authorize the actual debt from being issued.
And this is where, I think, if any constitutional option can be taken, where it could be made: the determination that, by passing an unbalanced budget in the first place, Congress implicitly increased the debt ceiling to cover that budget.
I like this view more than the pure 14th Amendment view, for reasons expressed by its critics -- but it could use a little more constitutional bolstering. The 27th Amendment provides it -- or, if one chooses, bolsters the 14th.
The Constitution Does Not Require a Car Crash
Like the Admiral, I interpret the Constitution to say that when Congress appropriates money for and authorizes expenditures on something, pursuant to some bill, it implicitly endorses an increase in the debt limit to allow for the continuation of a program.
An automotive analogy will helps us consider how the budgeting process allows Congress to rein in spending:
Congress may bring the government’s momentum to a halt by easing up on the accelerator (not authorizing new spending),
or it may do so by stepping on the brake (repealing previous authorizations),
but it is not entitled to slow the growth of government by requiring that the President slam into a brick wall.
What evidence is there of this? Well, consider the implications of the alternative theory, that if Congress doesn’t approve a debt ceiling increase then we “slam into the brick wall” of a government shutdown, for the operation of the Twenty-Seventh Amendment. If the system worked the way critics of the "14th Amendment" approach say it does, you get a truly twisted result.
To cut to the chase: if the Constitution operated so that the President had to "slam the government into a brick wall in order to stop it" whenever the debt ceiling was hit, then Members of Congress could not be paid, after a debt limit expired during their term, no matter what they did with respect to the debt limit after the previous general election date. That's right: if by 11:59 p.m. ET on Nov. 5, 2012, the President has not signed a law extending the debt ceiling to as high as it would conceivably need to be raised through Nov. 3, 2014, then if any debt ceiling vote becomes necessary between those dates due to the prospect of government insolvency /all federal legislators could not be paid again until Nov. 4, 2014.
I submit that this could not have been the intended effect of the 27th Amendment (either from its author James Madison or from the 38 states that ratified it in the late 20th century, after "debt limit" laws had come into being.) If you agree that this is an absurd result, the question becomes: "why it is an absurd result?" And, I will conclude, it's because a debt limit law is a "ministerial act," not an opportunity for Congress to grab the steering wheel and aim for a brick wall.
The three to the fightin' third Amendment
Let's start with the text of the Twenty-Seventh Amendment:
No law, varying the compensation for the services of the Senators and Representatives, shall take effect, until an election of Representatives shall have intervened.
(An aside, just to give Agitated Dear Reader a chance to settle down and rest: the Twenty-Seventh Amendment, as you may know, was to be the original "Second Amendment" in the Bill of Rights proposed to Congress by James Madison, but it and the first First Amendment were not ratified back at the time. The original First Amendment has never been ratified, but the original Second Amendment was plucked off the shelf by Wyoming in 1978 to be ratified and then ratified by thirty-seven more states after that.)
What effect does the debt limit has on Congressional salaries? It allows them to be paid. Without the increase, no pay. With the increase, pay. A debt ceiling adjustment, therefore, varies the compensation for the services of Senators and Representatives -- if it has more than a ministerial effect. (That is, if it were not simply a technical requirement that could, in a pinch, be ignored.) If it has only a ministerial effect -- if it's a formality, like counting the Electoral Votes in Congress after the election -- then it does not vary the compensation of Congress, and it can be passed at any time.
The last increase in the debt ceiling was in February 2010. An election has interceded since then, so the 27th Amendment wouldn't prohibit its operation at this moment. But let's say the last debt ceiling increase had come in February 2011 and that Congress now refused to raise the ceiling. What role should the 27th Amendment play in that analysis? Should Obama should be able to, of his own accord and on his own reading of the 27th Amendment, say that Congressional salaries must be paid? Would he have to appeal to a Court before directing that they be paid?
Actually, the previous hypothetical may offer a clue. I said that the 27th Amendment would not apply here (because an election of House members has intervened) -- but is that true?
I will tentatively propose an argument, as part of a reductio ad absurdum, that the 27th Amendment prevents any prospective bill to raise the debt ceiling from taking effect until November 2012 -- at least with respect to compensation of federal legislators -- because doing so would constitute a "law, varying the compensation for the services of the Senators and Representatives" and thus cannot "take effect, until an election of Representatives shall have intervened."
To explain: without this law, the Senator and Reps could not get paid, because the government runs out of money. With this law, they can get paid, because the government won't run out of money. Therefore, passing a debt ceiling increase now would violate the Twenty-Seventh Amendment as applied to Congressional salaries. In fact, it's not only that: any law increasing the debt ceiling passed after the most recent general election day would be void, with respect to federal legislator salaries, because without that law the government would have run out of money (and they could not be paid) and with the law the government doesn't run out of money and they can be paid.
I submit to you that that cannot be the intended meaning of the Twenty-Seventh Amendment, which supersedes the Fourteenth, even though from its plain language it would apply to any raising of the debt ceiling.
But if that's not the intended operation of the Twenty-Seventh Amendment, why isn't it?
I refer you to the above. It's because the Twenty-Seventh Amendment applies to legislative actions -- and raising a debt ceiling is not a substantive legislative action. The substantive legislative action was the appropriation of funds for Congressional salaries in the budget. If raising the debt ceiling is a mere formality, without the power to add or detract to Congressional compensation, then it does not violate the Twenty-Seventh Amendment.
That also means, though, that as a ministerial act the President -- especially given the powers described above -- is free to ignore its absence. (Remember when there was that bill that ended up being worded different in the two chambers and was nonetheless given effect in apparent violation of the Presentment Clause? That was a similar analysis.)
What that means is that there should be no plausible case for impeachment if the President acts unilaterally here. The President would be using sound judgment in deciding that the lack of a debt ceiling increase was simply a matter of Congress deciding to blast through its self-imposed credit limit -- something that it can do without consequence -- and that the President would be violating the law only by refusing to expend lawfully appropriated funds.
That, in turn means that Obama may act -- and that, in turn, means that Obama must act. And to those wealthy people who bet on default and stand to lose a lot of money if it doesn't come through -- both from buying stocks low and from a lasting risk premium on government bonds -- we merely say: "sorry, but the U.S. Government /can't default on a technicality. Next time be sure to read the Constitution all the way to the end."
Take the Seventh Option, Mr. President. Cut through the Gordian Knot of the noose around our collective neck.