Can Obama invoke the Constitution and ignore debt ceiling?

Image: Republican Legislators Speak After Meeting With Obama At The White House
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.Alex Wong / Getty Images
/ Source: National Journal

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.

“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.

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.

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.”

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.”

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.