At todays press conference the President restated what he said in January that there are no tricks around the debt ceiling, such as the 14th Amendment, gigantic coins or script.
And I know there's been some discussion, for example, about my powers under the 14th Amendment to go ahead and ignore the debt ceiling law. Setting aside the legal analysis, what matters is -- is that if you start having a situation in which there -- there's legal controversy about the U.S. Treasury's authority to issue debt, the damage will have been done even if that were constitutional, because people wouldn't be sure. It'd be tied up in litigation for a long time. That's going to make people nervous.
So -- so a lot of the strategies that people have talked about -- well, the president can roll out a big coin and -- or, you know, he can -- he can resort to some other constitutional measure -- what people ignore is that ultimately what matters is, what do the people who are buying Treasury bills think? And again, I'll -- I'll just boil it down in very personal terms.
If you're buying a house, and you're not sure whether the seller has title to the house, you're going to be pretty nervous about buying it. And at minimum, you'd want a much cheaper price to buy that house because you wouldn't be sure whether or not you're going to own it at the end. Most of us would just walk away because no matter how much we like the house, we'd say to ourselves the last thing I want is to find out after I've bought it that I don't actually own it.
Well, the same thing is true if I'm buying Treasury bills from the U.S. government, and here I am sitting here -- you know, what if there's a Supreme Court case deciding that these aren't valid, that these aren't, you know, valid legal instruments obligating the U.S. government to pay me? I'm going to be stressed, which means I may not purchase. And if I do purchase them, I'm going to ask for a big premium.
So there are no magic bullets here. There's one simple way of doing it, and that is Congress going in and voting. And the fact that right now there are votes, I believe, to go ahead and take this drama off the table should at least be tested. Speaker Boehner keeps on saying he doesn't have the votes for it, and what I've said is, put it on the floor. See what happens. And at minimum, let every member of Congress be on record. Let them -- let them vote to keep the government open or not, and they can determine where they stand and defend that vote to their constituencies. And let them vote on whether or not America should pay its bills or not. And if, in fact, some of these folks really believe that it's not that big of a deal, they can vote no.
And that'll be useful information to -- for voters to have. And if it fails and we do end up defaulting, I think voters should know exactly who voted not to pay our bills, so that they can be responsible for the consequences that come with it.
These positions are not new. In a January 14, 2013 press conference he said "There are no magic tricks here, there are no loopholes." This reiterated what the President,
through the Treasury, stated a few days earlier that he will not use the platinum coin option. Both statements echoed his decision in 2011 that he would not use the 14th Amendment option.
All of all these issues are discussed in this post but here is a summary.
It has been argued the President could use the authority to mint a platinum coin in a trillion dollar denomination and use those funds to continue to pay the Treasury's bills. The second alternative was to use his authority to issue scrip that would be used to pay the debts of United States until the debt limit that could be raised and real dollars borrowed. The third option was for the President to simply say that he has the authority under the 14th Amendment, or some other constitution provision, to issue debt notwithstanding the fact that the issuance would exceed the amount of the debt limit law.
The President will not choose the first two options because, whether or not one thinks he has the legal authority to issue a platinum coin or issue scrip, the President knows that both internationally and domestically taking either of those actions would be viewed as a gimmick, a magic trick. They would at the least raise significant legal issues that would call into question the validity of any debt that is issued. Also, either of those actions would merely be kicking the can down the road. They would be giving the Congress an excuse to not raise the debt limit because the President would have continued to keep the country operating and the Republicans would have been let lose to fight the President in the courts and through impeachment hearings.
The third option was for the President to assert that the 14th Amendment gives him the authority, if not a requirement, to avoid default notwithstanding the debt limit. But this assertion would not only raise the legal and practical issues of the first two, but also create a significant Constitutional crisis, a crisis between the President and the Congress as well as between the President and the Supreme Court.
Asserting this position is not the same as a conflict between two statutes, where the President interprets one statute as overriding another. Many people have suggested this possibility by arguing that the Congress has passed Appropriations Acts and that they require the President to spend the money appropriated, a requirement which conflicts with the debt limit law. That argument has little merit. There is no statute that says money that is appropriated must be spent if there is no money available. In fact, if you look at every Appropriations Act the lead off language is ,
"That the following sums are appropriated, out of any money in the Treasury not otherwise appropriated, . . . . . "
"Any money in the Treasury." Very soon if Treasury cannot borrow money and put it in the Treasury, there will only be three dollars in the Treasury for every four dollars of bills coming due. Appropriations acts simply do not authorize let alone require the expenditure of funds that the Treasury does not have. There is no conflict between Appropriations Laws and the Debt Limit law. One tells Treasury how to spend money in the Treasury, the other limits how much can be borrowed to put money in the Treasury. This question is totally different than the question of whether the President can refuse to spend appropriated funds when such funds are available, which the Supreme Court
has ruled to be unconstitutional.
Simply put we are talking about the President asserting the power to unilaterally decide whether he will comply with laws that are duly enacted by Congress and signed by the President. Except for Nixon no President has done that, in this way, since Lincoln suspended the Habeas Corpus provisions of the Judiciary Act of 1789. The action was challenged by a prisoner but Lincoln ignored a court decision which ruled the action Unconstitutional. Eventually, however, Congress essentially ratified his action.
The President would be effectively declaring the debt limit built to be unconstitutional because it conflicted with his 14th amendment powers. He would be declaring unconstitutional a law that was passed many decades ago and has been amended scores of times since then. A law which during all that time no President has ever declared to be unconstitutional or in any way inconsistent with the President's powers under the 14th amendment.
The President has made clear that he will not take these actions. He knows they do not solve the underlying problem and run the risk of chaos over an extended period of time in the international financial markets and damage to the standing of the United States that may take a long time to fix. And it goes without saying that the political chaos this would create domestically would ruin any chance of his being able to achieve anything in his second term.
Also posted at September 17, 1787.