The recent downgrade of the United States credit rating by Standard & Poors is not based on the actual ability of the United States to pay its debts, but rather mostly on political calculations and the nature of the fiscal crisis as their report admits. In fact, the concerns expressed relate to the ability of the US political system to effectively deal with the fiscal crisis, so the downgrade was almost entirely an indictment of the political uncertainty as it might affect stability.
“[W]e see the path to agreement as challenging because the gap between the parties remains wide. We believe there is a significant risk that Congressional negotiations could result in no agreement on a medium-term fiscal strategy until after the fall 2012 Congressional and Presidential elections.”
There is no specific mention of the debt-ceiling negotiations, but with a system so dysfunctional that there was a significant risk of some form of “default” on our credit, this crisis does illustrate the difficulties in reaching agreements. This strategy of “holding the country hostage” in order to achieve political goals has meant that a number of self-inflicted wounds have been made and are continuing to be made that can and will affect our economy. Furthermore, it seems reasonable to assume that this “standoff” will likely rear it’s head yet again at the next opportunity. Mitch McConnell has virtually promised this in this statement:
“I think some of our members may have thought the default issue was a hostage you might take a chance at shooting. Most of us didn’t think that. What we did learn is this — it’s a hostage that’s worth ransoming.”
With the debt-ceiling crisis behind us, discussions about whether the President should have invoked the 14th amendment in order to raise the debt ceiling without congressional authorization have devolved into accusations that he is a wimp, spineless or a bad negotiator. Most people seem to think this action would have been virtually unchallenged, or that any challenges could have been met relatively easily without any “unintended consequences.” A few have considered some of the potential problems, mostly for the President, but the possible scenarios carry significant risks to our economy, the world economy, and our system of government.
For anyone familiar with the debt ceiling, skip this paragraph. The debt ceiling is a law enacted by congress in 1917 that was intended to limit the amount of debt the country could accumulate. All debt incurred by the United States is through legislation enacted in the House of Representatives and approved by the Senate and signed by the President, so the law is intended by congress to enforce fiscal discipline on congress itself. It has been viewed as a signpost for the future to tell them to cut back spending. Whether it had the intended effect is debatable, and it has been raised a total of 74 times since the law was enacted.
It wasn’t until this House of Representatives decided to use the debt ceiling against itself that a crisis was created. The threat was that if a budget could not be passed that met certain criteria (which changed a few times), then the House (and possibly the Senate) would not vote to raise the debt ceiling, and, given that the debts are appropriations already made, that would mean a credit default. (For now, we’ll ignore the congressmen that claimed there was no need to raise the debt ceiling.)
The 14th amendment has a long history and dates to the end of the Civil War. Congress did not want to be responsible for any debts incurred by the Southern States, but wanted to be clear that it would pay any debts owed by the North. Only sections 4 and 5 apply to the public debt. They read as follows:
Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
Section 5. The Congress shall have power to enforce, by appropriate legislation, the provisions of this article.
Those advocating that the President invoke the 14th amendment in order to raise the debt ceiling, borrow money by issuing treasury bonds, and pay outstanding debts focus on the first sentence of section 4 and claim that, since the debts of the US shall not be questioned, the congress does not have the authority to refuse to pay those debts. In effect, they are saying that the debt ceiling law is unconstitutional.
While the debt ceiling law is possibly schizophrenic, it is not necessarily unconstitutional, and there has been no ruling to that effect.
In any case, there are several potential problems with having the President override Congress in order to issue Treasury bonds for the payment of our debt.
It’s Illegal
Regardless of whether it would be good, bad or indifferent, it is a standing law. It has not yet been ruled unconstitutional, and it is unclear who has standing to have it ruled so. As the law stands, only Congress has the authority to order the issuance of bonds for the payment of the public debt just as they alone have the authority to apportion money and levy taxes under Article 1, Section 8, and this includes specific references to “pay the Debts.”
Even if you think it would be a good idea to bypass congress and raise the debt ceiling, the law as it stands prohibits that.
Impeachment and Conviction
A simple majority of the House of Representatives is required to impeach a President, and they have done it twice before. The grounds for impeachment would be that President Obama would have broken the law and therefore committed a “High Crime.” This would not necessarily even include the High Crime of violating the separation of powers and usurping the authority of congress, although I’m sure a case could be made for that, particularly since Section 5 of the 14th amendment specifically appoints congress to enforce the provisions of the amendment.
The Senate would be given the task of trying the President. The question before them would be the simple one: Did the President disobey a law? It is not the Senate's prerogative to question the validity of the law (they alone cannot invalidate a law passed by both houses and signed by a previous president), and in any case the law has been observed 74 times before.
Unless the Senate abdicates its responsibility, the only reasonable conclusion is that President Obama would have, in fact, disobeyed a law. A vote otherwise would be an admission of partisanship, and it would be a lie. It is unclear what punishment would be chosen, but certainly removal from office would not be impossible.
Fate of the Bonds
What would the world make of bonds that were issued by order of a discredited President of the United States? Would this country even honor them? If Congress proceeded to honor those bonds, it would de facto validate the President’s actions and invalidate their own impeachment proceedings. To do otherwise would destroy the full faith and credit of the United States, and might even throw into question the validity of any US Treasury bonds. This puts congress into an impossible situation of making one of two really bad choices. A Hobson’s choice of their own.
Imagine for a moment what that would do to the prices of our bonds, the bond market, the stock market, and the world economy?
Setting a Precedent
Even if the President “got away with” invoking the 14th amendment and congress did nothing, the specter of this President or a future President using this precedent in other ways might alter the separation of powers indelibly and permanently.
Not only could he have avoided future problems with the debt ceiling, but a President might also use the precedent to authorize payment of other debts despite a need for congressional authorization. At this time, for example, Congress has not been able to reauthorize the Federal Aviation Administration, thus idling around 74,000 government employees and private contractors. Are their contracts legitimate debts owed because of appropriations of congress? Would the President then honor those debts by authorizing the work that they have been contracted to do?
Could congress “defund” a program that has been funded by legitimate appropriations, or could the President “invoke the 14th amendment” in order to continue funding?
There is a concern that the President might take this success as grounds to authorize any funding that congress has been unable to accomplish legislatively.
It could even be taken further. If the President can disregard a law passed by Congress with impunity, what further limits to his power would there be? The wisdom of the separation of powers has been validated many times over, and unrestrained executive power would eat away at our system of government.
It is not these specific scenarios that should worry us necessarily, but the uncertainty regarding everything relating to relations between the executive and legislative branch.
Unforeseen Consequences
As Donald Rumsfeld so eloquently stated:
[T]here are known knowns; there are things we know we know.
We also know there are known unknowns; that is to say we know there are some things we do not know.
But there are also unknown unknowns – the ones we don't know we don't know.
That is a pretty good description of uncertainty.
Conclusions
For every scenario I have described, there are smart people who would say that there is some way around each of them. Even in the best scenario, there would be confusion and uncertainty in both the government and the economy (if not outright breakdown). Anyone who claims to know the outcome of this grave course of action suffers from hubris, overconfidence, ignorance, or unsupported hopefulness.
Layering a constitutional crisis on top of the debt-ceiling crisis on top of an existing economic crisis is not a recipe for a good outcome. Economies are fragile things that run on trust and trust alone; a fact that has been overlooked recently by the political establishment (and most particularly the Republican Party).
Perhaps one could imagine that the self-destructive actions of congress might lead to catastrophe some day, and the actions of a President could save the nation from disaster (or at least reduce the impact of their actions), but if that day comes, we will no longer have a representative democracy.
A failure of the system that unimaginable would be a failure of democracy itself. If that is even conceivable, then the downgrade of our credit rating would not only be justified, it would be prescient.
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