The three-month standoff between the White House and Congress over the debt ceiling threatens a first-ever default on the nation’s financial obligations, which could occur as soon as June 1.
That possibility could be avoided if the president chose to simply ignore the debt ceiling and resume borrowing money to pay the legal debts Congress itself has authorized, some legal experts say.
Nearing the Financial Cliff
President Joe Biden and House Speaker Kevin McCarthy (R-Calif.) have been at odds over raising the debt ceiling since January when Treasury Secretary Janet Yellen warned Congress that the nation was close to the borrowing limit.
For decades, increases in the debt ceiling were a matter of routine. More recently, both sides have used the occasion to extract either spending cuts or spending increases from the opposition.
In this case, McCarthy has said Congress will not increase the limit until the president agrees to limit future spending. Biden has insisted that Congress approve a debt increase without pre-conditions.
Although the president has invited congressional leaders to discuss the matter on May 9, the White House insists there will be no negotiation. Instead, the president will remind Congress of its duty to pay the nation’s bills while offering a separate conversation on future spending.
The President’s Dilemma
As the country approaches the borrowing limit, the president faces a dilemma. He is caught between the appropriations laws duly enacted by Congress, the debt ceiling, and the 14th Amendment to the U.S. Constitution.Section 4 of the 14th Amendment states, “The validity of the public debt of the United States, authorized by law … shall not be questioned.”
The amendment was ratified in the wake of the Civil War amid fears that lawmakers from Southern states, once readmitted to the Union, would refuse to honor federal debts incurred during the war.
The amendment puts it beyond doubt that the United States will always pay its debts.
The government incurs debt when Congress directs it to spend more money than it has. Deficit spending has been the norm for most of the country’s history, especially during the past 50 years. When there is a deficit budget, the executive branch must borrow money to carry out the spending Congress has directed by law.
Yet, Congress also created a debt ceiling.
The limit was imposed in 1917 when the government began issuing Liberty Bonds to finance U.S. involvement in World War I. The ceiling placed a lid on the dollar amount of debt the Treasury could acquire through bond sales.
Now, the debt ceiling frequently puts the executive branch in a conflict between carrying out the intentions of Congress expressed through its appropriations acts and honoring the debt ceiling, also enacted by Congress—not to mention the 14th Amendment, which mandates that all legal debts of the United States must be paid.
In this tug of war between the debt ceiling and the Constitution, some legal scholars say the Constitution wins.
If the country reaches the point of default, the president would be justified in ignoring the debt ceiling, according to Neil H. Buchanan of George Washington University Law School and Michael C. Dorf of Cornell Law School.
“In short, despite a legitimate range of reasonable disagreement over the meaning of Section 4, we think it is best read as obligating the federal government to pay all of its obligations but not limiting federal borrowing. Thus, during an impasse of the sort that was narrowly avoided in August 2011, Section 4 would require the president to refuse to honor the debt ceiling if doing so would cause the government to fail to meet any of its financial obligations in a timely manner,” they wrote in a 2012 article published by Cornell Law School.
Legal Issues
Ignoring the debt ceiling would likely draw a court challenge, some legal experts told The Epoch Times. Others were less sure.“It is hard to predict whether courts would attempt to stop this,” Joseph Fishkin, a law professor at the University of California–Los Angeles (UCLA), told The Epoch Times.
“Hopefully, the Supreme Court would recognize that intervening in this area would compound the damage to U.S. credit. Unfortunately, the mere threat of Supreme Court intervention, even if no one can tell how likely it is, would itself be damaging. The court’s best approach would be to refuse to intervene and to do so quickly.”
Nicholas Creel, an assistant professor of business law at Georgia College & State University, agreed. “President Biden ignoring the debt ceiling is absolutely something that could survive a legal challenge,” Creel said.
Political Ramifications
Assuming that ignoring the debt limit would not be struck down by the courts, the president could face political fallout from doing so, according to Joe Wert, a professor of political science at Indiana University Southeast.“Americans don’t want the government defaulting on the debt, but they also don’t want debt ceilings ignored. They think that would mean the government could just keep spending and spending, even more than they do now,” Wert told The Epoch Times.
The Least Bad Option
Aside from invoking the 14th Amendment, presidents have other options to legally avoid defaulting on the nation’s financial obligations. However, no president has chosen to use them.“The debt ceiling is not unconstitutional. A default is unconstitutional,” Gerard Magliocca, a professor at the McKinney School of Law at Indiana University, told The Epoch Times. But it is not the only, and perhaps not the best, option available for avoiding default, he added.
“The Treasury has lawful means to prevent a default without violating the debt ceiling. They can issue ‘premium bonds’ or use the trillion-dollar coin idea,” Magliocca said.
A premium bond is issued at an above-market interest rate to replace a bond that is coming due. This would result in a net gain for the Treasury without increasing the debt.
The trillion-dollar coin idea would allow the government to create more money without printing paper currency, the total value of which is limited by law.
Many others have suggested that a temporary suspension of the debt limit would allow the nation’s leaders more time to negotiate a deal.
“I think there’s a path forward, a viable political path forward here. And I think the first thing that needs to be done is the debt limit needs to be suspended,” Mark Zandi, chief economist at Moody’s Analytics, told the Senate Budget Committee on May 4.
“There’s no time to get this [negotiation] done before the x-date,” he said. “And I would recommend suspending the limit to the end of the current fiscal year, the end of September.”
The White House has refused to publicly acknowledge that it is considering any of these options.
Asked about minting a $1 trillion coin, White House Press Secretary Karine Jean-Pierre said it was a matter for the Treasury to consider, then reframed resolving the debt ceiling a job for lawmakers.
“This is a question for the Congress,” Jean-Pierre said on April 27. “It is their constitutional duty to get this done.”
Asked whether the president would consider invoking the 14th Amendment, Office of Management and Budget Director Director Shalanda Young restated the idea that Congress is responsible to resolve the debt crisis.
“Let me be very clear, Congress needs to do its job. Tomorrow they could put a bill on the floor to make sure we don’t default,” Young said at a May 4 press briefing.
However, when asked about a possible short-term extension of the debt ceiling to allow more time for negotiation, Young said, “I’m sure one of the things on the table we will have to work through is how long. I’m not going to take anything off the table.”
If a default becomes imminent, the president will face a difficult choice, according to Buchanan and Dorf.
“A presidential decision to avoid violating Section 4 of the Fourteenth Amendment would not necessarily ensure that the president avoided violating other constitutional obligations,” they wrote.
“Once one recognizes that a president cannot simultaneously carry out all three laws without violating the Constitution, it is necessary to determine how a president should decide which law to set aside. With nothing but unconstitutional choices, what should a president do?”
