Image: Kevin McCarthy, Eric Cantor, John Boehner.
Alex Wong  /  Getty Images
U.S. House Majority Whip Rep. Kevin McCarthy, R-Calif., left, House Majority Leader Rep. Eric Cantor, R-Va., middle, and Speaker of the House Rep. John Boehner, R-Ohio, walk toward the microphones after a meeting with President Barack Obama June 1, 2011 at the White House following a conference on the national debt ceiling.
updated 7/1/2011 3:40:47 PM ET 2011-07-01T19:40:47

The continuing rift between the two parties’ deficit reduction strategies has led to new consideration of untested legal remedies for the potentially devastating economic repercussions of a failure to raise the debt limit by August 2.

The country’s $14.3 trillion aggregate borrowing limit is the legacy of a 1939 congressional act designed to give Treasury more flexibility to manage the country’s finances — previously, Congress had authorized debt in installments and by need —  but if the legislature fails to increase the limit and Treasury exhausts its cash supply, the administration will face unprecedented legal questions.

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“Is it constitutional for Congress to refuse to pay debts that it has authorized the government to borrow?” asks Garrett Epps, a University of Baltimore law professor who argues that a little-known clause in the 14th Amendment could allow the president to simply ignore the statutory debt ceiling.

Sens. Chris Coons, D-Del., and Patty Murray, D-Wash., have also cited that argument, according to the Huffington Post, and at a press breakfast in May, Treasury Secretary Timothy Geithner read the amendment aloud from a pocket Constitution. Nonetheless, Treasury officials insist “there is no Plan B” and that the debt ceiling will be raised.

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If the government does run out of cash, conservatives argue that the administration can simply choose to prioritize payments, citing a 1985 GAO report's “tentative” conclusion that the secretary of the Treasury “does have the authority” to do so. A number of Republicans have lined up behind a bill sponsored by Sen. Pat Toomey, R-Pa., which would clarify that debt payments must be the top priority, but Geithner has argued against that path, writing recently that doing so would have nearly the same effects as a default.

According to a Bipartisan Policy Center analysis, paying off interest on the debt, Social Security and health care entitlements, defense contractors, and unemployment insurance would take up the country’s entire monthly income.  The rest — including military pay, veterans’ affairs, IRS refunds, and federal employee salaries — would simply be left unpaid.

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Even if interest is paid, failure to meet other obligations would raise concerns about the long-term viability of U.S. debt. Geithner warns that market participants would stop reinvesting in U.S. debt, demanding Treasury make good on the much larger principle of its obligations and forcing the very default that the prioritization plan is designed to avoid.

However, the fourth section of the 14th Amendment makes clear that that United States's public debt “shall not be questioned.”  Written to prevent resurgent Southern politicians from canceling Civil War debts, it could now be invoked to supersede the debt ceiling and allow the administration to continue borrowing, but it also reinforces conservative arguments about paying bondholders first.

“There is a non-frivolous argument that Section Four would authorize the president to ignore the debt ceiling,” said Louis Michael Seidman, a constitutional law professor at Georgetown University Law School. “He could respect the debt… by simply not spending money for anything else. On the other hand, the president is also obligated to take care that the laws are faithfully executed under Article Two, and there are laws requiring payment of appropriated funds.”

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Along with Seidman and Epps, Michael Abramowicz, a George Washington University law professor, and Jonathan Zasloff, a UCLA law professor, have advocated this interpretation. Others, including Michael Stern, an expert in congressional legal issues, have criticized efforts to declare the debt limit constitutional, saying it violates the separation of powers.

“This is pushing executive authority to the limit,” Epps conceded. “My argument is it’s not much further, if at all, than how previous presidents pushed.... This goes back to the Jackson administration: The government becomes paralyzed, the president seizes the power to act unilaterally.”

It’s not clear if the Department of Justice’s Office of Legal Counsel, which would likely rule on the legal strategy, has been asked to consider the validity of the argument. Every legal expert contacted by National Journal took care to emphasize that these legal arguments are untested by courts and carry considerable political risk.

“There would be a constitutional crisis, and in the end these things are always resolved in some sense politically,” Seidman said. “It would be a very high-stakes struggle.”

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Those well-known issues could be joined by others as Gingrich’s 13 years out of office—he left congress in 1998—come under greater scrutiny in the coming months, some Republicans say.

“I suspect when someone does opposition research, they’re going to come up with all kinds of things that he’s going to have to explain,” said Fergus Cullen, a former chairman of the New Hampshire GOP. “He’s had the luxury of no scrutiny for a long time and whether he’d hold up to that scrutiny is an open question.”

The article, "Failure on debt-ceiling talks may mean constitutional, economic double bind," first appeared in the National Journal.

Copyright 2012 by National Journal Group Inc.

Video: On debt issue, are there two types of Republicans?

  1. Closed captioning of: On debt issue, are there two types of Republicans?

    >> we have john heilman and dr. jeffrey sachs still with us. the writer for "the washington post " and msnbc contributor, jonathan capehart. that brought washington together. i feel -- i don't want to be polly ann, but i feel like we are on the cusp of an agreement. when the president said what he said and the republicans responding.

    >> yeah. take a valume. now bill clinton is chiming in because --

    >> i'm expecting a double rainbow over the capital.

    >> it's bad. come on.

    >> what's happening?

    >> the bickering. they are bickering about who is where. why not take the weekend together, jonathan capehart.

    >> maybe they should and stop with the petty fights of where is the president? why isn't he here? he's been around, as he said. we see these fights all the time. you are joking around, you see this really intense bickering before an agreement pops up. this time, it feels different. we are looking at an august 2nd deadline for the nation to default. for the credit of the united states to be called into question.

    >> ha feels different?

    >> we are going to see the signs of the market reacting to the inaction in washington and when people's interest rates start going up and money market accounts start shriveling, maybe people will burn up the phone lines and protest and demand congress and the white house work together.

    >> jeffrey sachs , you can see when the democrats said and the republican's response. do you see reason for optimism?

    >> i see a political system that is breaking down. i think more and more, we are going to need actually a third party in this country to come in, right in the middle and talk basic sense. this, i think, is what's happened. both parties are trapped by their lobbies. they are trapped by their big money contributors. nobody is budging because they are out campaigning. nobody is governing. we are seeing a political breakdown. this isn't really about ideology. this is about the campaign. the sad part is we are always campaigning in this country, not governing.

    >> if i could -- isn't it part of the problem voters? take for instance, paul ryan puts out a plan that wants to do -- make major changes to medicare. everyone flips out. the poll came out that showed an overwhelming majority of democrats were against it. a majority of them were against it. a convincing majority of republicans were against it. if the american people aren't willing to make the tough choices or accept the tough choices that have to be made and talked about around the table, how can congress make the real deals?

    >> it's actually something different. there is a solid majority now for a few things. get out of the wars and cut the military spending sharply. raise taxes on the rich. have a public option on health care to get the costs down. so, there is a solid majority out there. but the politicians don't want to hear it because their campaign contributors don't like their solution. the rich pay the campaign bills.

    >> the industrial complex runs us into so many wars. we are spending trillions wasted down the drain. the health care industry prevented reform to get the cost down on health care . the public is in the right place but the public has no say in washington . that's the problem.

    >> somebody said the president should take a valume. that felt like one. that's depressing.

    >> it's pathetic. the other thing that's weird for us, we have two year cycles of national elections. no other high income country in the world does that. they have four or five years. they take a break from the elections, from the posturing and govern in between. we don't govern anymore. that's the problem.

    >> sorry i interrupted.

    >> no.

    >> john heilman , how do we break this down?

    >> man, it's worse than a volume. i feel like i have taken arsenic.

    >> no, the truth is, people are sensible and in the middle. i don't disagree with the things that have been said.

    >> we were discussing earlier one of the things that's been true since the start of the negotiation, when -- the final deals never happen until they have to happen. we saw it of the government shutdown . it is a very ugly and pathetic time right now with people calling their names, et cetera . i thought if there was going to be a deal, the deal would happen within 12 hours of the last moment the deal has to happen. i understand jonathan 's point. i'm not saying this is the best way to run a government. there's a lot of posturing going on. the interesting thing that's been shown here is republicans rightly or wrongly think they have the president's number. they think the reason they are pursuing this maximalist way. the president is not a great negotiator. in the end, they can keep moving the goalpost down the field and the president will give more and more. i think there will be a deal at the end of july and early august. the question is, where the deal is. part of what's going on now with the republicans is they think they have a lot of leverage and they can get a better deal, which in my view is worse for economy. they think they can get a better political deal because the president is weak.

    >> is the president weak compared to bill clinton who ended up using republicans and these deals?

    >> chiming in on the process.

    >> there are two negotiating styles. hopefully we'll see president obama be more like bill clinton in that regard than he has been in the past. i just wonder if there are two types of republicans we are talking about. there are the republicans in the room hammering out the deal and then the 84 or 87 tea party republicans in the house with speaker boehner's job a living hell in terms of getting bills passed and getting things done.

    >> there are two different kinds. the extent the white house thought there was a deal to get done, the people the white house has been talking to. they are a smaller group of republicans that have signaled to them in the last few months, there's going to be a lot of posturing but we are willing to meet you half way. the question is whether or not those people actually speak for their caucus and can bring them along to any kind of deep hole .

    >> they may not.

    >> speaking of campaigning. mitt romney has harsh words as he took his presidential campaign to pennsylvania yesterday. romney held a news conference outside a closed metal works factory, a location obama used in 2009 to talk about the stimulus plan as proof the president's handling of the issue hurt the country. take a listen.

    >> as you look around and see the weeds growing and windows boarded up, it's more a symbol of the failure of the obama policies. the plant has been opened 100 years. it survived the great depression. it couldn't survive obama economy.

    >> reports show he did not say stimulus funds would include money for the factually that closed its doors in january, 2010 . meanwhile, at a fund-raiser in philadelphia , the president said the criticism from romney and others is political, as usual.

    >> while i'm working candidates are going to do what they are going to do. they are going to attack, here in philadelphia , they are going to attack. they won't have a plan. but they will attack. the american people are less interested in us attacking each other. they are more interested in us attacking the country's problems.

    >> all right. that's great.

    >> that will solve it. wow.

    >> is it going to be solved like that?

    >> who knows. who knows. it won't be solved. maybe papered over with something to take us through the election. i think in the end, it will happen. we will not solve these problems right now. at best, we are going to push the problems down the road, once again.

    >> you know, i want to clarify --

    >> none of this is serious toward real solutions, none of it.

    >> yeah.

    >> all of it is posturing and campaigning. i think both sides do want to avoid a default of the united states on a technical grounds. both sides want to get to the 2012 election. maybe they will paper over something. deeper problems in the country, nobody is trying to solve them.

    >> neither side is talking about how to create jobs. neither side is talking about the income disparity between the richest and poorest americans, which even alan greenspan says is a concern. they are not talking about how we are competing with china. they toss out a line here or there. i haven't seen a plan, including the president, with making us more competitive with china in a meaningful way.

    >> that's right. nobody put anything forward. for years, it goes back before this president has been incredible improvisation. we don't think ahead.

    >> okay.

    >> is that fair?

    >> yes.

    >> i'm not sure about that. go ahead.

    >> the president came into office and he talks about up vesting in the future, investing in alternative education to compete with china.

    >> the words are good, but there was never a budget appropriate for it or real planning behind it. the idea we are going to have the shovel ready stimulus and that's going to be competition was a mistake from the first moment. last december when they blew up the deficit one more time in the face of this massive budget hole. it's opposite of thinking ahead. i agree. it's thinking the future. you have to show planning and budg budgeting.

    >> when we were talking before, i said if we don't do things before the second deadline, people's interest rates go up and their money markets shrivel up. someone on twitter, this guy corrected me and thank you very much, by saying actually if interest rates go up, it's good for money markets. i don't know.

    >> so, then we talk about all the campaigning. that romney story just ran, you know, just to clarify, i said it. he used that factory to talk about how obama 's stimulus plan hasn't worked. obama used it as a backdrop to tell the stimulus plan but never to give stimulus money. the image romney is using --

    >> people are clamoring for stimulus money. there's a lot of campaign slight of hand. it is interesting, in a political sense. i know we have been talking policy here but mitt romney is running like a general election campaign.

    >> yep.

    >> every other republican candidate is out in iowa or south carolina or new hampshire and mitt romney is following wherever barack obama is, he is there. barack obama is in philadelphia , so he's in allentown. it's a strategy that projects an extraordinary amount of confidence on his part that he's going to be the republican nominee.

    >> you can talk to the romney people. when we talk about sarah palin , they are thrilled. when we talk donald trump , they are thrilled. when we talk about michele bachmann , he's thrilled. he's raising money, going to factories that were open when barack obama was campaigning and closed now. all in all, it's a -- we criticize him all the time here, but it seems to be working. keep your head down, raise money and stay above the republicans .

    >> as you know, it can be summari summarized. in 2007 , hillary clinton campaigned like this. kind of ignored barack obama for the better part of the year and got surprised when he came out of nowhere. there are dangers to the strategies, too.

    >> at least around this table, mika thought from the beginning the president could win. i did not. then i saw the first quarter report of 50 million. i said game on. you knew then -- i do not think there's anybody that's going to come close to mitt romney in money.

    >> michele bachmann .

    >> more money than you would


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