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Once Again, Pelosi Puts Her “Stupid Hat” On

The 14th Amendment and the Debt Ceiling

Let’s assume the continuing resolution fight plays out as expected and one is passed and there is no government shutdown and all the dire consequences predicted by Harry Reid and Dick Durbin fail to occur. At the very worst, there is a 1-2 day shutdown. The financial scare-mongering by those Democrats in Congress fails to note that since 1976 there have been 17 “government shutdowns” lasting a total of 110 days. The sky did not fall and the predicted hardships failed to materialize. At worst, they inflicted damage on the political party on whom the pundit class placed the blame. The next big fiscal fight will be over the debt limit ceiling which, according to Treasury Secretary Jack Lew, will be reached on or around October 17th. In all likelihood, we will hear Durbin and Reid yet again predict financial calamity should Congress not present Obama with what they call a “clean bill-” just raise the debt limit as requested and move on.

First, it needs to be mentioned that failure to increase the debt limit will not necessarily lead to a government shutdown. There are options the government can take of a short term nature. The federal government takes in about $175 billion in tax revenues a month. This revenue coupled with the selling of assets, like the gold in Fort Knox, would be enough to service the existing debt obligations as they come due. But eventually, this money would run out. After the debt obligations were satisfied, the remainder of the money, if any, would be used to fund government operations. More on this in a little bit…

The fear is that by not increasing the debt limit, it places the “full faith and credit” of the United States at serious risk. As long as the existing debt is being paid as it comes due, the full faith and credit of the United States is just fine. Compare this to the average consumer: as long as you pay your credit card and other bills on time, your credit is just fine. A credit rating agency does not decrease your rating because you make a decision not to take on any more debt than that which you currently have now. These assertions that because some credit rating agency downgraded the rating of the United States in 2011 as the primary danger is fool-hearty. Weren’t these the same credit rating agencies implicated in the great financial collapse of 2008-2009? Weren’t these the same credit rating agencies giving AAA ratings to dubious financial instruments at Bear-Stearns and the like? Their record in this area is suspect at best.

Given the current debt which is approaching the size of the economy itself, there will naturally be less money to fund the government. This is the real fear of Democrats. Assertions that Obama will not negotiate over the debt ceiling is one the most hyper-partisan comments ever and one that is simply in keeping with his leadership style. The perpetual Campaigner-in-Chief is already sounding the alarm bells predicting the collapse of the entire global economy if Congress does not roll over and give him what he wants, which is a continuous blank check for government spending.

In 2011, a proposal was floated that the President can unilaterally increase the debt ceiling under Section 4 of the 14th Amendment. That amendment states, in pertinent part:

The validity of the public debt of the United States, authorized by law, including debts incurred for pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned

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Some legal minds have asserted that this clause gives the President unilateral power to raise the debt limit ceiling. Although by no means a “legal mind,” Nancy Pelosi has once again asserted that the President has this power. First, no one is questioning the validity of the public debt, only the validity of additional debt. Second, when one reads further on in this section of the Amendment, one can easily see that it is of historical importance with respect Reconstruction era politics. Fearing that as states were re-admitted into the Union that the former Confederate states would insist that debts incurred by the former Confederacy be paid by the federal government, section 4 was proposed. This section specifically repudiates that assertion and removes it from Congressional or political consideration by placing it in the Constitution. However, as the victors, the Union asserts and codifies that the debt they incurred is valid and beyond reproach and, in effect, the newly readmitted states share in the payment of those debts. There were also some very real concerns that former Confederate states would balk at paying widowers and pensions of Union soldiers, thus the line about pensions was inserted. In fact, Pelosi and others assert that Obama could use this section of the 14th Amendment not only to unilaterally raise the debt limit but to also pay Social Security. Given the actual wording of the section, one would be hard-pressed to reason what “insurrection or rebellion” is addressed by Social Security.

It is true that, given the Congressional record and debate in this area, the ultimate goal of this section- although historical in context- was designed to remove the nation’s debt from becoming a political tool with respect to the debt incurred from fighting the Civil War. The primary proponents of this section- Senators Wade, Howard and Hendricks- however, wrote the clause in such broad terms, some claim, that it is intended to keep not only the Reconstruction Congress from defaulting on the debt, but to keep future Congresses from also doing so when that debt involves politically unpopular spending. There has been only one example of this clause being litigated and that occurred in 1935 when the Supreme Court ruled that Congress- under the 14th Amendment, section 4- could not void a bond, although they also ruled that the bondholders in that case could not be paid despite their legal victory by using some twisted logic. That 1935 decision also stated that although the historical context is well-known, the language is sufficiently broad to disregard that historical context.

And granted, many parts of the Constitution are of historical importance, but have been broadened. For example, under the amendment ending Prohibition- one must concede this is a “historical” amendment- there is still tax law and underage drinking litigation argued under that amendment today. Here, conservatives cannot have their cake and eat it too. If we restrict the amendments to their mere historical context, then liberals can argue with some degree of accuracy (not much, but some) that the Second Amendment or the Quartering of Soldiers is simply historical in nature and can be ignored today.

Assuming Obama resorts to this tactic and suddenly changes his mind and legal reasoning for not doing it thus far, he would be in new constitutional area that would be potentially dangerous. In effect, if all the options by the president are exhausted- using incoming revenue to pay debt as it comes due, selling assets, selling off gold reserves- and the drama drags on to some point where existing debt cannot be paid, then he has two choices. First, he can simply let Congress violate the law and the country actually does default on its debt. That would be a serious situation and create a Greece-like financial collapse. Second, he could unilaterally increase the debt limit, as Pelosi suggests, and let the chips fall where they may.

Where the chips fall would be a de facto fiscal dictatorship that would render Congressional powers in Article I, section 8 moot. What, then, would be any check on the Executive unilaterally raising taxes or overtaking any other of the enumerated powers of Congress? After all, Article I specifically states it is the power of Congress to raise taxes or borrow money on the full faith and credit of the United States. The Executive cannot assert some power where one does not exist in the name of a national crisis- real though that crisis may be- as Harry Truman found out when he tried to seize steel mills.

Even in the case of the debt ceiling not being raised by Congress or Obama and, assuming he pays debt obligations, his hands would be tied regarding the “left over” funds, if any. The Executive cannot unilaterally “prioritize” payments as that would amount to the impounding of appropriated funds. This is prohibited under the Budget Act although, again assuming there are no constitutional problem under the 14th Amendment, that Amendment trumps the Budget Act. In effect and in conjunction with Congress, the federal government would be forced into a pay-as-you-go situation with funds left after debt obligations are paid- a series of mini-appropriation battles. Unfortunately, that would bring the Nation’s debt problem into full view for all Americans; it would no longer be an abstract ticker on your computer.

The solutions should Obama decide to enter new constitutional area if he unilaterally raises the debt ceiling is dangerous to Obama himself. It is highly likely that no court would take a case as no one has particular standing to challenge the action. It is conceivable the Supreme Court could take the case on an expedited basis, but that would be highly unlikely as they would want to avoid wading into an area, ironically, better left to the political branches of government. In fact, the issue of standing has been litigated recently in the Arizona school “voucher” (actually tax credit) case where an individual tax payer was deemed not to have standing. No single Senator or Representative would have standing, nor would either house of Congress since they themselves were not harmed, even if both agreed. The solution is not in the courtroom; it is political. Therefore, it is silly, ridiculous and somewhat childish for Obama to assert he will not negotiate with Congress on this issue. Ironically, the only recourse against unilateral action by Obama would be impeachment. There would be rather good grounds for that course of action that may actually garner some bipartisan traction. Thus, Obama would need to think long and hard about unilateral action here. In sum, it would be a serious power grab by the Executive in violation of the Constitution. If not addressed, what then would stop a future Republican president from doing the same?

Because the Constitution specifically states that all revenue and spending measures must originate in the House, should the President choose unilateral action, raise the debt ceiling, and then actually borrow money on that action, he would be in clear violation of the Constitution. What Pelosi seems to miss here is the fact that the Republicans are not questioning the validity of existing debt, only the validity of taking on additional debt without Congressional approval. It is funny how Democrats insist on congressional approval for practically everything when a Republican occupies the White House, but that demand suddenly disappears when their person is in the White House.

Thus, to answer the multi-trillion dollar question, can Obama unilaterally raise the debt limit ceiling and then borrow money on those new parameters? Using this tactic under the 14th Amendment would certainly be unique and a constitutional first. Given the Obama administration’s penchant for being perhaps the most extra-constitutional administration since Franklin Roosevelt or perhaps Woodrow Wilson, it would not be a major surprise to this writer. Whether it is technically constitutional is questionable at best. Again as Pelosi fails to note, the clause states the validity of the public debt authorized by law- again, authorized by law(!)- shall not be questioned. The question then becomes when did an Executive Order become the equivalent of a “law?” The last time I checked, Congress makes the laws and the president executes them. Every president, whenever a debt limit ceiling was reached, deferred to Congress to raise that limit, not take unilateral action. To do so now, using the guise of Section 4 of the 14th Amendment as cover, would render the separation of powers and the enumerated powers of Congress null and void. In effect, they would be subjugated to the Executive and all that was fought for over these many years would be for naught. We truly would be a banana republic complete with a dictator in the White House.

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