Is the debt ceiling constituional?

[JoeTheJuggler]

That provision of the 14th is so vaguely worded that I can certainly see it be interpreted the way you have, but the stronger understanding, which I agree with right now (not knowing a whole hell of a lot about the issue), would indicate that the US can't constitutionally default on obligations by choice.

I would agree with that interpretation. . . maybe. I think invalidating debt goes further even than a default. You can default and still consider the debt valid. (Greece?)

But I agree it's about doing it by intention.

A debt ceiling is not equal to defaulting. In fact, it's a self-imposed measure Congress has taken for the original intention of making it less likely to default (by not getting in over our head). However, since we are in over our head, it's having the unintended consequence of preventing us from borrowing enough to avoid defaulting.

But again, I don't think a debt ceiling itself is unconstitutional. In itself, it doesn't require invalidating public debt. It only addresses how much debt to authorize to begin with. (Once authorized, that public debt may not be invalidated.)

ETA: I'm just basing my distinction between default and invalidate on regular usage. If anyone knows if these are terms of art with more specific meanings, I'd love to hear. I'm thinking this part of the 14th Amendment was primarily drafted out of fear that the U.S. might not respect its war debts and pension commitments. Congress can't declare that since it was a time of emergency, those debts are invalid and those papers will no longer be honored, or any such.

ETA: Saying that a debt ceiling forces a default is no more valid than saying a debt ceiling forces an increase in taxes.

 

[TraneWreck]

I would agree with that interpretation. . . maybe. I think invalidating debt goes further even than a default. You can default and still consider the debt valid. (Greece?)

Greece hasn't defaulted yet. This new round of controversial austerity measures is meant to secure more bailout funds to avoid a default.

Argentina was the last major default, I believe (could be wrong).

But again, I don't think a debt ceiling itself is unconstitutional. In itself, it doesn't require invalidating public debt. It only addresses how much debt to authorize to begin with. (Once authorized, that public debt may not be invalidated.)

That's an interesting issue. A debt ceiling is constitutional until it has the effect of causing a default, then it would violate the 14th (just speaking hypothetically, again, I have some suspicions about the Constitutionality, but claim no athoratative argument). Of course, that would mean that it was Constitutional until it actually did what it was constructed to do, meaning that it probably should just be ruled unconstitutional.

Again, the problem is the vague language of the 14th combined with the fact that there is exactly zero precedent to guide us. It would be a totally new issue for the SCOTUS.

ETA: Saying that a debt ceiling forces a default is no more valid than saying a debt ceiling forces an increase in taxes.

Maybe not so in theory, but to refuse to extend the debt ceiling right now would cause a default (absent some quick and delicate tinkering by the Treasury Department).

It's possible that a court ruling could maintain a debt ceiling for its less direct effect (forces politicians to consciously deal with the debt on a year to year basis rather than let it grow without notice), but rule that it cannot have the effect of causing a default. In other words, it wouldn't really have any teeth.

I don't know, it's a bizarre issue and one most sane people thought would never come up. "The Gephard Rule," essentially that the debt ceiling would be raised as needed to pass a year's budget, was just ignored by Boehner. That's a radical step, both economically and from a "Congressional tradition" perspective, and that's what's forcing this crisis. It's odd we hear little discussion about that move, and everything is couched in terms of the negotiation.

 

[JoeTheJuggler]

Greece hasn't defaulted yet.

Greece has defaulted on average one out of every two years since its independence in the 19th Century. (Linky.*) But the debt still exists. (In fact, just as with personal credit card debt, missing a payment or paying late actually increases the debt and results in higher interest rates if new credit is even available. I think "invalidate" is more similar to getting bankruptcy protection from creditors--basically erasing a portion of the debt.)

*[ETA: I'm finding conflicting histories on Greece's record of defaults, but suffice it to say that nations may and have defaulted on servicing their debt without erasing the debt.]

That's an interesting issue. A debt ceiling is constitutional until it has the effect of causing a default,

But isn't that simply begging the question? I don't think a debt ceiling causes a default. Not paying the debt service is a default. It could be done by severe (austere) spending cuts or severe revenue (tax) increases, or even, I understand, by some creative accounting (that is also not without consequences).

And again, I'm still not convinced that default is the same as invalidate or questioning the validity of debts.

Again, the problem is the vague language of the 14th combined with the fact that there is exactly zero precedent to guide us. It would be a totally new issue for the SCOTUS.

I predict no such case will go to the SCOTUS.

If I get a chance, I'll see if there's any legislative history on the part of the 14th Amendment that sheds any light on what the intention was.

"The Gephard Rule," essentially that the debt ceiling would be raised as needed to pass a year's budget, was just ignored by Boehner.

I've never heard of that, but I think it's a reasonable way of interpreting law. If you pass a budget that requires borrowing beyond the debt limit, and that budget was passed by both houses and signed by the President, then isn't that exactly the same thing as passing legislation that repeals or extends the debt limit? (Which of course means that the debt limit is meaningless law--maybe more like a statement of a fiscal goal than anything.)

 

[JoeTheJuggler]

I found the following, from someone making the case that the 14th Amendment does make the debt ceiling unconstitutional:

Benjamin Wade, the sponsor of that part of the 14th Amendment wrote:

The proposed amendment] puts the debt incurred in the civil war on our part under the guardianship of the Constitution of the United States, so that a Congress cannot repudiate it. I believe that to do this wil give great confidence to capitalists and will be of incalculable pecuniary benefit to the United States, for I have no doubt that every man who has property in the public funds will feel safer when he sees that the national debt is withdrawn from the power of a Congress to repudiate it and placed under the guardianship of the Constitution than he would feel if it were left at loose ends and subject to the varying majorities which may arise in Congress.

While the guy who quoted this equates "repudiate" with "default", I'm still not convinced. Failing to pay the debt service on time is not the same thing as Congress willfully repudiating that debt.

And I'm certainly not willing to say I'm sure I'm right about this. But to me, default isn't nearly as big a thing as what the 14th Amendment prohibits.

And anyway, again, technically a debt ceiling isn't a default. It only can be said to cause a default just the same way it can be said to cause a tax increase or cause spending cuts. Basically, the budget as it is won't fit under the ceiling, so something has to give.

Personally, I'm in favor of the view that passing a budget that doesn't fit under the limit is effectively repealing the limit, even if it would be cleaner if Congress passed a law that explicitly repealed or increased the debt ceiling.

 

[hgc]

I'd say there is no constitutional problem with infinite borrowing.

Nor is there a constitutional problem with Congress imposing a limit on borrowing.

In fact, a limit on borrowing makes the constitutional mandate that all debt is valid easier to abide by.

The debt limit law is not a limit on borrowing. It's a limit on paying it back. It seems to me that the law, if applied to stop debt payment on schedule, is in conflict with the constitution.

I predict the following: The debt limit is not raised. Obama ignores it and keeps paying the debt. The Republicans have a wet dream come true, and commence and impeachment effort against Obama.

 

[Alferd_Packer]

A budget impasse has shut down the sate of Minnesota.

A preview of this August?

 

[JoeTheJuggler]

The debt limit law is not a limit on borrowing. It's a limit on paying it back. It seems to me that the law, if applied to stop debt payment on schedule, is in conflict with the constitution.

If what you say is true, then I'd agree. It's certainly against the constitution to say that the government can intentionally refuse to honor debts that were authorized by law.

But I don't think that's what it says:

http://www.law.cornell.edu/uscode/31/usc_sec_31_00003101----000-.html

The way I read it, it sets a limit on the total debt the U.S. can assume at just under $12.4 trillion*. I'll admit I'm not the best at reading the financial lingo of the statue, but that figure is given, and it does line up (depending on which figures you use) with the total debt we've accrued and not with debt service or payments.

So I think it is actually a debt ceiling (a limit on borrowing) and not a limit on payments. If it were, it would be explicitly in conflict with the 14th Amendment. It would be calling for the U.S. not to honor debt that was authorized by law.

*ETA: Most recently raised to c. $14.3 trillion in Feb, 2010. http://thomas.loc.gov/cgi-bin/query/D?c111:4:./temp/~c111JbPK5j:: (Here's the summary: http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HJ00045:@@@D&summ2=m& )

 

[eeyore1954]

Bigger minds than mine can argue about whether or not it is constitutional and come to different opinions but in my mind there should be no bickering about raising it or tying it to tax raises / benefit cuts etc. Congress already approved the spending and tax cuts so raise the limit. It is like me ordering filet mignon at an expensive restaurant for my family and some friends but when the bill comes I have to decide if I want to pay.

 

[hgc]

If what you say is true, then I'd agree. It's certainly against the constitution to say that the government can intentionally refuse to honor debts that were authorized by law.

But I don't think that's what it says:

http://www.law.cornell.edu/uscode/31/usc_sec_31_00003101----000-.html

The way I read it, it sets a limit on the total debt the U.S. can assume at just under $12.4 trillion*. I'll admit I'm not the best at reading the financial lingo of the statue, but that figure is given, and it does line up (depending on which figures you use) with the total debt we've accrued and not with debt service or payments.

So I think it is actually a debt ceiling (a limit on borrowing) and not a limit on payments. If it were, it would be explicitly in conflict with the 14th Amendment. It would be calling for the U.S. not to honor debt that was authorized by law.

*ETA: Most recently raised to c. $14.3 trillion in Feb, 2010. http://thomas.loc.gov/cgi-bin/query/D?c111:4:./temp/~c111JbPK5j:: (Here's the summary: http://thomas.loc.gov/cgi-bin/bdquery/z?d111:HJ00045:@@@D&summ2=m& )

Look at it this way: What happens when the debt limit is not raised, and our debt rises above $14.3 trillion next month? If the result is that the US starts defaulting on it debt obligations, then that's very straightforward -- we are not honoring out debt, in variance with the 14th amendment. Or, Obama breaks the law and pays, while claiming that the superior law, the constitution, forces him to do so.

 

[JoeTheJuggler]

Look at it this way: What happens when the debt limit is not raised, and our debt rises above $14.3 trillion next month? If the result is that the US starts defaulting on it debt obligations, then that's very straightforward -- we are not honoring out debt, in variance with the 14th amendment. Or, Obama breaks the law and pays, while claiming that the superior law, the constitution, forces him to do so.

I think we simply construe the fact that Congress passed a budget that Obama signed that authorizes debt beyond the ceiling so they have effectively repealed the ceiling. That is, Obama can claim the most recent of two acts of Congress (between the debt ceiling and the budget) authorizes accruing more debt to pay the service on the debt. No need to invoke the 14th Amendment.

Also I'm still not so sure that defaulting (that is not making timely payments or servicing the debt as agreed) is the same thing as invalidating the debt or repudiating it (to use Wade's word). I agree the motive is the same--we don't want investors to lose faith in government paper.

But again, the debt ceiling wouldn't directly be the cause of the default. I think the passage of a budget that would lead to that situation is as much to blame. (That is, you could also reasonably claim the debt ceiling causes Congress to raise taxes.)

Anyway, I think if they fail to raise or repeal the ceiling, I have no problem with construing the most recently passed budget as effectively doing just that.

 

[hgc]

I think we simply construe the fact that Congress passed a budget that Obama signed that authorizes debt beyond the ceiling so they have effectively repealed the ceiling. That is, Obama can claim the most recent of two acts of Congress (between the debt ceiling and the budget) authorizes accruing more debt to pay the service on the debt. No need to invoke the 14th Amendment.

Also I'm still not so sure that defaulting (that is not making timely payments or servicing the debt as agreed) is the same thing as invalidating the debt or repudiating it (to use Wade's word). I agree the motive is the same--we don't want investors to lose faith in government paper.

But again, the debt ceiling wouldn't directly be the cause of the default. I think the passage of a budget that would lead to that situation is as much to blame. (That is, you could also reasonably claim the debt ceiling causes Congress to raise taxes.)

Anyway, I think if they fail to raise or repeal the ceiling, I have no problem with construing the most recently passed budget as effectively doing just that.

Interesting theory. Let's see which one they argue with when the time comes. They're already bruiting the constitutional angle. In either case, the Teahadists will go apesh*t on Obama and there will very likely be calls for impeachment.

 

[hgc]

And another thing -- The debt ceiling law is literally an attempt to limit reality withing the law. This is clearly impossible. The debt continues to increase, even if payments are stopped, as the interest accumulates. So, an interesting question is: even if one thinks that Obama can legally continue to pay the debt, is he reasonably constrained by the law from issuing new debt? There'll be a whole lot of money printing going on.

 

[davefoc]

My understanding was a little different, but perhaps it was wrong.

Congress passes a budget that authorizes spending $100. The federal government only has $60 to pay for the authorized spending. Presumably the congress expects the government to borrow $40 to make up the difference when it passed a budget authorizing the spending of $100.

There is a law in place that limits the amount of money the government can borrow and without a modification to that law the federal government can not borrow the full $40 to pay for the spending.

In an effort to look fiscally conservative while still providing unfunded benefits to their special interests the congress decides to feign not raising the debt ceiling.

Even if the congress decided to actually not raise the debt ceiling, nothing in this scenario forces the government to default on debt payments. However, the federal government would be forced to substantially reduce non-debt payment expenses to make up the short fall not covered by the proscribed borrowing.

Where's the constitutional issue? The president presumably with the assistance of congress would need to raise revenues and/or substantially reduce spending in a very short period of time. As a guess, many people would suffer, but also some sacred cow expenditures that are wildly against the national interest like agricultural subsidies, the ethanol scam, the medicare drug scam, pork barrel military spending would all be reduced. The federal budget rose precipitously under Bush and the expansion of federal spending at the end of the Bush administration to combat bank failures and miscellaneous economic crisis related spending was continued and perhaps expanded on by Obama. Reversing that trend is an absolute requirement for the beginning of the re-stabilization of the American economy. The only question is when does it begin and does waiting have any real benefit beyond giving the various special interests lining up for their government handouts a little more time to imbibe.

ETA: A lot of the sacred cow spending that would need to be reduced as a result of a true decision not to raise the debt ceiling benefits Republican crony interests and I seriously doubt the Republican Party has any real interest in reducing public funding of the special interests that are a key to their election. I expect a compromise will be worked out where Republican and Democrat special interests take a bit of a temporary hit and the debt ceiling will be raised after the Republican Party thinks they have succeeded in convincing their fiscally conservative constituents that they have been fiscally conservative while they actually just continue the massive unfunded spending that they have been authorizing for at least the last 10 years.

 

[mhaze]

I would agree with that interpretation. . . maybe. I think invalidating debt goes further even than a default. You can default and still consider the debt valid. (Greece?)
....

Well, a good example of this is everyday court actions involving contracts. The defendant is not paying. He may or may not consider the debt valid. This is a matter discussed in the court. Then there is the issue of his not paying which is separate.

These issues are unchanged since the time the Constitution was written (although we don't have debtors' prisons anymore).

 

[Beerina]

That's not the way it's worded. It says all public debts "authorize by law" are valid, "including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion". It definitely did not say it only applies to those kinds of debts.

ETA: And of course, the "authorized by law" part goes back to the point that the Congress can indeed make a debt ceiling for itself as part of the way it determines how much debt is authorized by law. I see no constitutional problem with a debt ceiling, especially since Congress is free to change it.

Well, if Congress has historically understood *all* of its spending to be subordinate to a master law authorizing a debt ceiling, I see no problems with it.

Any politician trying to get creative so they can spend more just declaring the debt ceiling law invalid should be fired.

 

[mhaze]

Well, if Congress has historically understood *all* of its spending to be subordinate to a master law authorizing a debt ceiling, I see no problems with it.

Any politician trying to get creative so they can spend more just declaring the debt ceiling law invalid should be fired.

Why, you just don't get it.

The Constitution is only the latest version of a series of Progressive alterations, and those can be extended to whatever whim.

The Congress has historically used a debt ceiling, that isn't quite convenient so it needs to get tossed.

shall I continue?

 

[Freddy]

I don't think there is any merit to the argument that the 14th Amendment conflicts with Article I, which states that only Congress may borrow on the nation's credit. Lawrence Tribe has a very good op-ed in the NY Times explaining why the argument fails.

And that's a good thing. The executive should not have that kind of power. Democrats and Republicans in Congress need to strike a deal. There is no other option.

 

[TheNooch]

I've been following this "story" a little on the TV, and they still are clinging to this August 2cd date as being the "real" D-Day. It's only 3 weeks away, and the market isn't even flinching. This leads me to believe that the people with the money, the ones that control our government, aren't too concerned, or they know when to pull out.

If this gets down to the wire, like say 8-1-11, will the market make the decision for them? I mean, if the market were to begin free-falling, would Boehner and his tea-tards, suddenly have a change of heart?

 

[Freddy]

I've been following this "story" a little on the TV, and they still are clinging to this August 2cd date as being the "real" D-Day. It's only 3 weeks away, and the market isn't even flinching. This leads me to believe that the people with the money, the ones that control our government, aren't too concerned, or they know when to pull out.

If this gets down to the wire, like say 8-1-11, will the market make the decision for them? I mean, if the market were to begin free-falling, would Boehner and his tea-tards, suddenly have a change of heart?

Even beyond that, I believe the government brings in enough revenue per month (around $160 billion if I recall correctly) to continue servicing the debt, at least for a little while beyond that date. My understanding is that Aug. 2 is the date when we can no longer supply already-appropriated money to various agencies and departments. I'm fairly certain we can go beyond that date without defaulting immediately, because section 4 of the 14th amendment would require that servicing the debt be priority one.

 

[davefoc]

Even beyond that, I believe the government brings in enough revenue per month (around $160 billion if I recall correctly) to continue servicing the debt, at least for a little while beyond that date. My understanding is that Aug. 2 is the date when we can no longer supply already-appropriated money to various agencies and departments. I'm fairly certain we can go beyond that date without defaulting immediately, because section 4 of the 14th amendment would require that servicing the debt be priority one.

That was the point I tried to make in my long winded way in my post above. The government is going to have enough money to pay the interest and principal due on money it's already borrowed if it cuts other things instead. Can the administration just decide to make debt servicing a lower priority than other spending and thereby force a default?

This is not to say it won't be very messy if the administration needs to make massive unilateral spending cuts to avoid default. Clearly it is better that some kind of consensus budget be approved by congress. Right now it looks like the Republican congress that mhaze seems to favor has approved a budget which can not be funded by current revenues and the same Republican congress has decided to invoke a debt ceiling to override the budget they approved.

Given the massive spending by the Republicans when they were in charge the last time this doesn't surprise me. It does surprise me a bit that the Republican partisans in this forum remain such fans of the Republican Party given its penchant for hypocrisy but then it surprises me a bit that the Democratic partisans in this forum remain such fans of the Democratic Party given its penchant for hypocrisy.