As Treasury Secretary Janet Yellen recently observed, the United States has not defaulted on its national debt since its founding in 1789, and we should not start now.[1] She also pointed out that Congress has raised the statutory ceiling to pay the debts that it has authorized almost 80 times since 1960.[2]

This time might be different, however, because Republicans, with a bare majority in the House, are playing a sustained game of chicken with the White House. They are using the debt ceiling as leverage for budget negotiations, and former President Trump has egged them on in his recent “town hall” on CNN.[3] Specifically, the Republicans are demanding massive spending cuts to allocations that Congress made last summer, and they are giving new meaning to scorched-earth tactics by calling for the reversal of landmark climate legislation and for increasing subsidies to the fossil-fuel industry.[4]

Under these circumstances, President Biden should call the Republicans’ bluff.[5] While he should continue to negotiate in good faith, he should also make contingency plans to pay the government’s debts above the statutory debt ceiling established by Congress, and prepare a public announcement explaining why exercising this option is financially necessary and constitutional.

Essentially, the legal situation boils down to a classic case of conflicting statutes. A great many authorizations of spending by Congress under many different statutes may soon conflict with a single statute setting a budgetary debt ceiling. The president, who of course is charged constitutionally with executing the laws, may therefore be forced to make a choice. As Professor Robert Hockett has written, a traditional “later-in-time” rule of statutory construction gives precedence to later enacted statutes – so the congressional authorizations of spending should trump any previous statute setting a debt ceiling.[6]

As legal scholar Karl Llewellyn observed long ago, mere rules of thumb are not dispositive because one canon of legal interpretation can usually be found to counter another.[7] A more substantive argument, which Hockett also advances, emphasizes that Congress is putting the president in a constitutional double bind.[8] The president is being forced to choose between two bad options: default on the nation’s debt and become a “deadbeat country” for the first time in our history or exceed the statutory debt ceiling.[9] The “least unconstitutional option,” as law professors Neil Buchanan and Michael Dorf have argued in several articles, is to issue the needed debt to pay the government’s bills, even if that means exceeding the debt ceiling.[10] (Given that we live in an imperfect world, I believe this really means choosing the most constitutional option.) As Buchanan and Dorf show, debt-ceiling brinksmanship has become increasingly common in recent years – and at some point (perhaps now) a president will be forced to make the difficult choice. Although some serious economic damage will result, it may at least end the ridiculous budgetary dance of constantly risking a global financial crisis.

As Hockett also observes, Section 4 for the Fourteenth Amendment supports this position.[11]  This Public Debt Clause makes the common-sense commitment, following the Civil War, that “the validity of the public debt . . . shall not be questioned.”[12] A straightforward reading of the text applies here.

In an influential shift, the prominent constitutional legal scholar Laurence Tribe has changed his mind and supports the constitutional argument, though on different grounds. Referring to a similar debt-ceiling standoff during the Obama Administration, Tribe had written that the president does not have the authority to exceed a debt ceiling established by Congress under the Public Debt Clause.[13] Crediting the influence of Buchanan and Dorf on his thinking, he recently concluded that “the lesser of two evils” with respect to conflicting statutes in this kind of situation would be to respect the spending authorized by Congress – and ignore the debt ceiling which purports to prevent the president from performing his duty.[14]

President Biden has expressed respect for this view, saying “it would be legitimate” for him to exceed the debt ceiling to the extent necessary, recognizing that there would still be some significant uncertainty because the issue “would have to be litigated.”[15] Biden and others, including Secretary Yellen, realize that there is no good answer here other than persuading the House Republicans to step back from the precipice and act like grown-ups. If they don’t, then significant economic pain will ensue – perhaps even a global recession – but the blame will fall squarely on the Republicans and Trump who will have played with financial fire once too often.[16] Some good news may be that the practice of government budgeting by financial blackmail will end, though at a high price.

Finally, a few other arguments support the position that the president should pay the nation’s bills despite the debt ceiling. First, if members of Congress sue the president, then the political question doctrine may well disqualify them from having standing.[17] It is also difficult to imagine who else would sue the president for paying debts rather than reneging on them.[18] Second, the president would be acting in the face of a possible national emergency, which would occur if the government debt is not paid and “financial catastrophe” results.[19] As Professor Eric Posner argued in a previous rehearsal of the debt-ceiling game during the Obama era, the prospect of an emergency enhances the president’s constitutional powers.[20] In addition, Republicans are attempting to reverse the legislation passed last summer that cemented hard-won progress on another emergency, namely, the climate emergency.[21]

“Plan A,” as Senator Chris Van Hollen has argued, is that “Congress should do the right thing” and raise the debt ceiling. “Plan B,” however, should be for President Biden to prevent default by using all “legal authorities” possible.[22] For the reasons discussed above, Plan B would have a solid legal as well as political defense.

ENDNOTES

[1] Janet Yellen, “Janet Yellen on US Debt Ceiling, Banking System, China,” Bloomberg, May 12, 2023, https://www.bloomberg.com/news/videos/2023-05-12/janet-yellen-on-debt-ceiling-banking-system-china-video.

[2] Id.

[3] Eric Lutz, “At CNN Town Hall, Donald Trump Perfectly Embodies the GOP’s Cynical Debt Ceiling Game,” Vanity Fair, May 11, 2023, https://www.vanityfair.com/news/2023/05/donald-trump-cnn-town-hall-debt-ceiling-default.  I put “town hall” in quotations marks because the event appeared to be more like a media-sanctioned rally rather than a deliberative process.

[4] Jim Tankersley, “Biden Faces His First Big Choice on Debt Limit,” N.Y. Times, Apr. 27, 2023, https://www.nytimes.com/2023/04/27/us/politics/biden-debt-ceiling.html.

[5] Note that at least some Republican senators have disavowed Trump’s recommendation to default. Alexander Bolton, “GOP senators disavow Trump on debt ceiling, signaling growing rift,” The Hill, May 12, 2023, https://thehill.com/homenews/senate/4000704-senate-republicans-push-back-trumps-default/. At the same time, 43 Republican senators signed a letter in support of the House Republicans’ hardline position. Jeremy Diamond, “43 Senate Republicans vow to oppose debt ceiling increase without spending cuts,” CNN, May 6, 2023, https://www.cnn.com/2023/05/06/politics/senate-republicans-debt-ceiling-raise-spending-cuts/index.html.

[6] Robert Hockett, “This Is What Would Happen If Biden Ignores the Debt Ceiling and Calls McCarthy’s Bluff,” N.Y. Times, May 9, 2023, https://www.nytimes.com/2023/05/09/opinion/biden-mccarthy-debt-ceiling.html. Hockett elsewhere spells out more statutory canons in support, including those designed to avoid “absurd results” and to avoid constitutional problems. Robert Hockett, “Stop the Charade: The Federal Budget Is Its Own ‘Debt-Ceiling,’” Forbes, Jan. 19, 2023, https://www.forbes.com/sites/rhockett/2023/01/19/stop-the-charade-the-federal-budget-is-its-own-debt-ceiling/?sh=6f9d6e057bc9.

[7] Karl N. Llewellyn, “Remarks on the Theory of Appellate Decision and the Rules or Canons of About How Statutes Are to be Construed,” 3 Vanderbilt Law Review 395 (1950).

[8] Hockett, “What Would Happen,” op. cit.

[9] Yellen, op. cit. (citing risk of the United States becoming known as a “deadbeat country”).

[10] Neil H. Buchanan & Michael C. Dorf, “How to Choose the Least Unconstitutional Option: Lessons for the President (and Others) from the Debt Ceiling Standoff,” 112 Columbia Law Review 1175 (2012); Neil H. Buchanan & Michael C. Dorf, “Nullifying the Debt Ceiling Threat Once and for All: Why the President Should Embrace the Least Unconstitutional Option,” 112 Columbia Law Review Sidebar 237 (2012); Neil H. Buchanan & Michael C. Dorf, “Bargaining in the Shadow of the Debt Ceiling: When Negotiating over Spending and Tax Laws, Congress and the President Should Consider the Debt Ceiling a Dead Letter,” 113 Columbia Law Review Sidebar 32 (2013); Neil H. Buchanan & Michael C. Dorf, “Borrowing by Any Other Name: Why Presidential ‘Spending Cuts’ Would Still Exceed the Debt Ceiling,” 114 Columbia Law Review Sidebar 44 (2014).

[11] Hockett, “What Would Happen,” op. cit.

[12] U.S. Const. amend. XIV, § 4.

[13] Laurence H. Tribe, “Ceiling We Can’t Wish Away,” N.Y. Times, July 7, 2011, https://www.nytimes.com/2011/07/08/opinion/08tribe.html.

[14] Laurence H. Tribe, “Why I Changed My Mind on the Debt,” N.Y. Times, May 7, 2023, https://www.nytimes.com/2023/05/07/opinion/debt-limit.html.

Professor Michael McConnell has also recently argued against the constitutionality of exceeding the debt ceiling under the Public Debt Clause. Michael W. McConnell, “The Case for Violating the Debt Ceiling Is Dangerous Nonsense,” N.Y. Times, May 14, 2023, https://www.nytimes.com/2023/05/14/opinion/debt-limit-constitution.html. However, McConnell does not deal seriously with the double-bind problem. Instead, he follows Republicans who are simply blaming Biden for failing to negotiate without recognizing that it takes two to tango. The congressional power of the purse cannot be fairly read as giving the House dictatorial authority to reverse spending that has been previously authorized by Congress. Resolving the double-bind problem does not require reliance solely on the Fourteenth Amendment, though its Public Debt Clause supports a presidential decision to take emergency financial action to pay government debt that has already been authorized (and not retracted) by Congress.

[15] Sarah Ewall-Wice, “Can the 14th Amendment be used for the debt ceiling?” CBS News, May 11, 2023, https://www.cbsnews.com/news/can-14th-amendment-be-used-for-debt-ceiling/ (quoting Biden).

[16] At a minimum, short-term legal uncertainty would most likely cause borrowing costs to increase significantly. Jim Tankersley, “Is the Debt Limit Constitutional? Biden Aides Are Debating It.” N.Y. Times, May 2, 2023, https://www.nytimes.com/2023/05/02/us/politics/debt-limit-us-constitution.html  If Congress fails to act, as Yellen has warned, there would be “considerable economic and financial damage.” Yellen, op. cit.  See also Mike Lofgren, “Republicans Are Putting Our Standard of Living at Risk,” N.Y. Times, May 10, 2023, https://www.nytimes.com/2023/05/10/opinion/biden-mccarthy-debt-ceiling-dollar.html.

Continuing in his embarrassing run of financial and economic ignorance, Trump opined that failing to extend the debt limit by the default deadline “could be maybe nothing” or result in only “a bad week or a bad day.”  Lutz, op. cit. (quoting Trump).

[17] Robert A. Levy, “Is the Debt Ceiling Unconstitutional? What about Default?” Cato Institute, May 8, 2023, https://www.cato.org/blog/debt-ceiling-unconstitutional-what-about-default.

[18] Benjamin Wittes, “Can Biden Nuke the Debt Ceiling?” Dog Shirt Daily, May 13, 2023, https://www.dogshirtdaily.com/p/can-biden-nuke-the-debt-ceiling.

[19] As Janet Yellen points out, Biden’s choice may be either “economic and financial catastrophe” or “constitutional crisis.” John T. Bennett, “Debt crisis: Biden should seek a 14th Amendment legal ruling. Trump just showed why.” Roll Call, May 12, 2023 (quoting Yellen).

[20] Eric Posner, “Emergency Powers Let the President Borrow Beyond the Debt Limit,” N.Y. Times, Jan. 29, 2014, https://www.nytimes.com/roomfordebate/2013/10/02/can-obama-ignore-the-debt-ceiling/emergency-powers-let-the-president-borrow-beyond-the-debt-limit.

[21] William J. Ripple, et al., “World Scientists Warning of a Climate Emergency 2022, 72 BioScience 1149 (2022), https://academic.oup.com/bioscience/article/72/12/1149/6764747.

[22] Bennett, op. cit. (quoting Van Hollen).

This post comes to us from Eric W. Orts, visiting professor of law at Columbia Law School and the Guardsmark Professor of Legal Studies & Business Ethics and professor of management at the Wharton School of the University of Pennsylvania.