For those of you who never had the pleasure of the first year of law school, Prof. Erwin Chemerinsky, now the Dean of the new law school at the University of California, Irvine, is widely regarded as the best Constitutional scholar in the country. If you have ever gone to law school, it is highly likely that you have interacted with his writings, be it his authoritative Constitutional law textbooks or the material that he assembles for bar/BRI for Con Law bar review. He is also widely considered to be left-of-center, having survived an attempt by the conservative Chief Justice of the California Supreme Court, Ron George, to derail his hiring as UC Irvine's first dean.
Today, he writes an excellent, must-read piece for the Los Angeles Times, one that I fear will be overlooked due to its placement in the LAT blogs. Follow me below the Orange Squiggle of Awesome for his main points and some limited discussion.
All quotes in this diary are attributed to Prof. Chemerinsky unless otherwise noted. Bold is occasionally added to highlight key sections.
Hopes are usually pinned on an obscure constitutional provision, Section 4 of the 14th Amendment, which says: "The validity of the public debt of the United States, authorized by law, including debts incurred for payments of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."
Unfortunately, there is no plausible way to read this provision as providing the president the ability to increase the debt ceiling without congressional action.
Article I, Section 8 of the Constitution says that it is Congress that has the power "to borrow money on the credit of the United States." The Constitution thus could not be clearer that borrowing money requires congressional action. Nothing in Section 4 of the 14th Amendment takes this power away from Congress or assigns it to the president. Section 4 of the 14th Amendment says only that the debt of the United States shall not be questioned; it says nothing about who gets to determine the size of the debt or in any way shifts this power from the legislature to the executive.
Basically, the only thing that the 14th Amendment adds to discussions of the public debt is that debt that is borrowed legally - borrowing that is authorized by Congress - cannot be later disclaimed as invalid by the United States. This prevents the United States government from raising various defenses available in contract law, defenses that post-Civil War holders of American paper feared due to the enormous debts and economic ruin caused by South's petulant insistence on its divine right to enslave other human beings. Editorializing aside, there was a fear, both inside and outside the country, that the United States would use the extraordinary circumstances of the Civil War to attempt to avoid paying its crushing post-war burdens. The 14th Amendment's debt clause was a largely-successful effort to put that fear to an end, one reason that, before this summer, Treasury paper was considered the safest investment in the world.
Unilateral presidential action to raise the debt ceiling also would not solve the financial mess caused by congressional inaction. If the president acted on his own to increase the debt ceiling, the bonds that would then be issued would certainly be questioned and challenged in court. During this time, it is unlikely that this questionable borrowing would satisfy credit markets or rating agencies. It is estimated that decreasing the credit rating of the United States from AAA to AA would cost the federal treasury $100 billion a year in additional interest payments, to say nothing of the higher interest rates everyone in the country would pay on loans. It is highly doubtful that unilateral presidential action would provide sufficient confidence to rating agencies to avoid this dire consequence.
I fear that not enough is made of this. Even if the 14th Amendment were to be found by the current Supreme Court to allow the President to issue new debt, anyone buying that new debt knows that its validity would be tied up in court. Suddenly, not all Treasury paper would be equal - paper issued after the debt ceiling was reached would be considered to be of a lower investment grade because of the fact that anyone buying that debt would be buying a lawsuit; teabaggers would challenge its issuance and, regardless of whether or not they would be successful (or even if they would have standing to sue, a question that is too far afield to address in this diary), holders of Treasury paper would be hauled into US Court to defend the validity of their investments.
Given the low yield of US bonds, anybody retaining a lawyer for more than a day would find their investment wiped out, simply in order to protect their own rights. Although I'm not a credit rating agency and I'm not going to attempt to assign an investment grade to such debt, it wouldn't be AAA anymore, and America's AAA rating is one of the primary reason that deficit spending in the United States is so inexpensive and, up until now, reasonably sustainable. If the cost of borrowing spikes, the deficit would quickly go from being a teabagger talking point to being a real concern - the cost of servicing lower-grade debt with a higher interest rate would come out of our other priorities.
I completely understand the longing to find a way for the President to be the adult in the room and ignore a Congress that, hobbled by conflict between the Duke of Orange and the self-appointed leader of the teabaggers, is unable to act on the simplest of issues. Boehner's incompetence and Cantor's self-aggrandizing posturing are causing harm to us all.
But hopes that our Constitutional law scholar president will use the 14th Amendment as anything other than a bargaining chip are misplaced. It's time to face the fact that we need to extract reasonable terms from the House or default and watch the still-bad economy plummet to unspeakable lows. Let's focus on what can be done rather than pinning our hopes on what can't be done.
Please read the excellent full article from the Los Angeles Times for a better discussion than I could ever give this matter.