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Posts Tagged ‘debt ceiling’

The Constitutional Stakes in Debt Ceiling Brinkmanship

Posted by Peter M. Shane on October 14, 2013

If you don’t think the current government shutdown and fight over the debt ceiling are a threat to constitutional government, you’re not paying attention.

In my 2009 book, Madison’s Nightmare, I described a systematic “attack on checks and balances between 1981 and 2009 [that] can very much be seen as an assault on a constitutional culture built on checks and balances norms.” Iran-Contra, the government shutdowns of 1995, the Clinton impeachment, and the efflorescence of presidential power claims under Bush 43 all exemplified that attack.  Each episode was rooted in “the relentless campaign of the right wing of the Republican Party since 1981 to steer the capacities of our national government towards the fulfillment of a conservative social, economic and foreign policy agenda.”

The Republican minority in the Senate and the current GOP House majority are now intensifying that campaign.  Its results portend disaster for checks and balances.  Not only does the effort hurt the economy and undermine the quality of government service, but the GOP’s hostility towards interbranch accommodation positions the President so that he (or his successors) will be more likely to respond with initiatives that can only further corrode an institutional culture of self-restraint that is essential to constitutional government.

Consider, in this respect, the debt limit imbroglio.  Scholars and other commentators have advanced at least five options for a presidential response should Congress not raise the debt limit.

One is the trillion-dollar coin option.  The Treasury would use its facially unlimited statutory power to mint coins to create a platinum coin in a large enough denomination to avoid default and deposit it in the government’s account in the Fed.  The obvious problem with this option, which the Administration has already foresworn, is that the statute’s plain purpose is to authorize the minting of commemorative coins.  Congress could not plausibly have intended the Treasury to use its mint authority to augment the government’s borrowing capacity.  Just as bad, it might be seen as compromising the independence of the Fed, which is indispensable to its credibility.

A second is the Fourteenth Amendment option.  The President would declare the debt limit statute unconstitutional and thus inoperable at the point of default because in violation of the Fourteenth Amendment command: “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.”  The obvious problem here, as compelling as the historically based claim may be, is that, even if the President’s constitutional judgment is correct, it is not clear that the Fourteenth Amendment authorizes the President to create a remedy.  The White House has foresworn this option also.

A third option would be some form of prioritization.  The president could claim authority under the Impoundment Control Act to defer government spending other than paying off debt in such amounts as necessary to avoid further borrowing. He would presumably cite as his legal authority 2 U.S.C. sec. 684(b)(1), which authorizes deferrals to the end of the current fiscal year “to provide for contingencies.”  Of course, it would be odd to use the Impoundment Control Act to impose what would amount to the most ambitious presidential impoundment in history.  It would be turning the Impoundment Control Act on its head.

A fourth option would be a claim of some emergency authority inherent in the Constitution’s grant of “executive power.”  As suggested by Eric Posner: “[T]he president can declare an emergency and justify borrowing by citing reasons of state. . . .The president could invoke his ‘inherent’ executive powers under Article II of the Constitution (which vests the president with mostly undefined ‘executive’ powers).”  Unfortunately, there would be no obvious limit to the reach of such a precedent.  The argument that the Vesting Clause gives the President any robust set of unspecified domestic powers is dubious, to say the least, and Professor Posner’s suggestion could easily give root to a practice of presidential decrees utterly antithetical to a separation of powers.

Finally, the option I and others would favor – but which itself would also be audacious – is what I call the “faithful execution” option.  Professors Neil Buchanan and Michael Dorf have called this the “least unconstitutional” option, but I believe it would not be unconstitutional at all – just destabilizing.  Its premise is that Congress’s failure to raise the debt ceiling would leave the President with two irreconcilable demands – carry out Congress’s spending instructions as contained in current appropriations laws, but do not borrow money sufficient to carry out those instructions and repay debts already incurred.  It is as if he were told to drive simultaneously no faster than 45 miles per hour and no slower than 60.  The President cannot do both.

The solution under this option would be to interpret the appropriations laws as implicitly authorizing sufficient borrowing to allow the President to both carry out those laws and to repay U.S. debts on time, notwithstanding the debt limit statute.  Better he ignore one instruction than many, especially since ignoring many would involve making a host of budgetary prioritization decisions that are plainly matters for Congress, not the President.

Of course, were the President to pursue this option – or any of the others – it would likely remove any incentive for Congress ever again to legislate responsibly regarding a debt ceiling.  What one commentator has written about the trillion dollar coin option is only a slightly exaggerated assessment that applies to any unilateral presidential move to get Congress out of its hole:  “It would effectively mark the demise of the three-branch system of government, by allowing the executive branch to simply steamroller the rights and privileges of the legislative branch.”

A unilateral solution would also no doubt fuel calls for the President’s impeachment, which is currently a right-wing fantasy looking for a plausible legal hook.  For certain, the decline in our pre-1981 culture of interbranch accommodation would accelerate.

A British Prime Minister, Lord John Russell, famously observed: “Every political constitution in which different bodies share the supreme power is only enabled to exist by the forbearance of those among whom this power is distributed.”  Under the U.S. Constitution, the supreme power supposedly belongs to “the People,” but the absence of forbearance among those who exercise power in the People’s name threatens to render “the People” effectively powerless.  If Congress does not relent, believe me, things will get worse.

(This post appeared originally on the blog of the American Constitution Society.)

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Memo to Obama: Use Market Jitters to Seize the Initiative

Posted by Peter M. Shane on August 10, 2011

Thanks to the debt ceiling deal no one liked, official Washington seems poised now to wait for a cumbersome congressional process to drag the country again through an extended spectacle of pathetic political gamesmanship. Critical points on the time line between now and January 1 include the end of the fiscal year (September 30), at which point the government shuts down unless appropriations are enacted, the November 23 reporting date for the congressional Committee of Twelve, and the December 23 deadline for a congressional vote to head off sequestration. As things stand, we can expect an eleventh-hour, 59th-minute political nightmare on each of these dates.

Here’s an idea for the president: Don’t wait. Seize the initiative. Offer a progressive plan within the next two weeks, and demand Congress enact it by the end of the fiscal year.

The parameters for the plan should be straightforward. The Committee of Twelve is supposed to produce $1.5 trillion in deficit reduction. Make $2 trillion your target. But achieve half that deficit reduction through revenue enhancement and economic growth generated by a redirection of government spending away from low-return subsidies and towards investment in infrastructure, the clean energy sector, and research and development, plus short-term stimulus through extended unemployment insurance and a payroll tax moratorium.

And now for the hard part: Announce you are putting on the table the option of an October 1 government shutdown unless Congress enacts a plan that you find acceptable – a plan that must be jobs-and-growth oriented, protective of the middle class, and focused on revenues, not just cuts. (At the very least, this will tempt the GOP to taunt you with a continuing resolution too good not to sign.)

You will be standing on high ground. Just keep repeating the words, “families,” “middle class,” “growth,” and “jobs.” The markets want to see the United States take actual leadership and show it can address problems before we have a gun, already cocked, to our collective head. Please lead the way.

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What the President Should Say If Congress Misses the Debt Ceiling Deadline

Posted by Peter M. Shane on July 28, 2011

My Fellow Americans:

Today, for the first time in American history, the Congress of the United States has effectively prohibited the government from paying its bills. In the last 50 years, the debt ceiling has been raised 74 times, ten of those times since 2001. Those votes have been bipartisan. They have occurred under both Democratic and Republican presidents. They have been all but universally regarded as essential to preserving the full faith and credit of the United States. Yet a minority faction of today’s congressional representatives — in the face of proposed deficit-cutting plans with overwhelming support from the American people — has taken the unprecedented step of allowing us to slide into potential default.

As a result of this inaction — this betrayal of the trust of the American people — we must face a hard truth. If the government continues to spend the funds Congress has already appropriated at the rate Congress anticipated when it appropriated those funds, we will simply run out of money before the end of the fiscal year. We will face an across-the-board government shutdown, with no end in sight. We cannot let this happen.

Because this situation is unprecedented, there is simply no clear law to guide my actions in response to this crisis. Read literally, the Congressional Budget and Impoundment Control Act of 1974 allows me to defer spending that Congress has already authorized on the basis of what that statute calls “contingencies.” It has been argued that I may use that authority to choose selectively, designating obligations to meet now and obligations to defer in order to avoid a shutdown of government services. At the same time, I am also aware of arguments that the Act does not give me such authority — that a statute intended to control impoundments cannot faithfully be interpreted to allow a president to postpone so much spending at his sole discretion. If these critics are right — if the Impoundment Act does not give me such authority — then my decisions not to spend money on particular programs would violate the many statutory provisions under which Congress mandated that those funds be spent.

It has also been argued that Section Four of the Fourteenth Amendment allows me to ignore the statutory limit on incurring government debt. That section provides, “The validity of the public debt of the United States, authorized by law . . . shall not be questioned.” Some legal scholars argue that this provision authorizes the president to continue borrowing whatever funds are necessary both to meet our obligations to creditors and to continue funding government programs at the levels Congress has already approved. I have already expressed my doubts about the validity of this interpretation. I have been inclined to agree with those who read Section 4 as obligating Congress to provide for the repayment of debt, not to permit the president to ignore statutory limits on borrowing.

The fact is, however, that I am now faced with a no-win choice. I could cease government borrowing and defer some government spending, on a selective basis, under the uncertain authority of the Impoundment Control Act. But that would risk violating the many statutory provisions under which Congress has provided for government spending. I would risk disabling key government programs from operating effectively. Alternatively, if I continue government borrowing under the uncertain authority of the Fourteenth Amendment, then I will certainly be violating the statutory limit on federal debt and I will perhaps be misinterpreting our most fundamental law.

Let me clear about this conundrum. The Constitution obligates the president to “take care that the laws be faithfully executed.” I cannot duck that obligation. Yet, if I rely on one statute to withhold some government spending in order to advance what I regard as our critical priorities, then I risk violating some of the statutes through which Congress has directed the executive branch to spend money. The government spends only money that Congress appropriates; spending as Congress directs is, in most cases, a legal obligation. On the other hand, if I continue borrowing to fulfill these congressional mandates and to repay government debts that were lawfully incurred, then I am violating the debt ceiling and risk misinterpreting the scope of the Fourteenth Amendment. The legal path is not clearly marked either way.

Faced with this choice, I am compelled by both conscience and necessity to take the latter option. Deferring government spending under the Impoundment Control Act would require me to claim unprecedented discretion to pick and choose among programs that Congress has already determined to move forward. It would also leave the full faith and credit of the United States at risk, and impose numerous and unforeseen hardships on Americans who depend on the smooth and efficient operation of government programs already in place. If, however, I breach the statutory limit on borrowing, my assertion of power under the Fourteenth Amendment has a clear limit.  I can borrow no more than required in order to repay those debts that have been already been incurred pursuant to law without curtailing those government programs for which Congress has appropriated funds.  This is not a blank check. It is fulfilling a set of mandates that Congress itself has imposed.

I have thus decided to continue borrowing funds on behalf of the United States in order to repay those debts that have been already been incurred pursuant to law and to continue those government programs Congress has already authorized. In so doing, I believe I am faithfully executing both Congress’s current appropriations statutes and the intent of the framers of the Fourteenth Amendment to insure that the federal government would never repudiate its lawfully incurred obligations.

I would welcome congressional action to ratify this decision by statute. I would welcome even more the kind of balanced approach to debt reduction, deficit-cutting, and revenue enhancement that I have been urging on Congress for months and that can finally put our fiscal house in order for the next decade and beyond. Until Congress can reach some such agreement, however, I owe it to Congress and to the American people to stave off irreparable economic harm and to keep in effective operation the functions of our federal government for which Congress has already provided and on which the American people rely.

Thank you, and may God bless you and the United States of America.

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What May a President Do if He Cannot Pay Our Bills Without Borrowing and Borrowing More Money is Unlawful?

Posted by Peter M. Shane on July 19, 2011

An obvious question, should Congress not manage to fend off default within the next two weeks, is: What does the President do then?  If the President cannot pay off America’s creditors and keep all government programs running, what legal authority does he have to deal with the crisis?

A little history helps to put the answer in context.  In the nineteenth century, Congress simply did not have a budgeting process.  It appropriated funds for various federal purposes, confident that customs revenues would outpace federal spending.  In the unlikely event – unlikely, that is, before the Civil War – that appropriations outpaced revenues, Congress implicitly left it to the President to keep expenditures and revenues in line by not spending appropriations that were permissive rather than mandatory.

Congress did not adopt a formal budgeting process until 1921, when it created the Bureau of the Budget (now, the Office of Management and Budget) in the White House and the Government Accounting Office (now, the Government Accountability Office).  The 1921 Budget Act was the first to task the President with presenting Congress each year with a proposed budget for its consideration.

Flash forward now to the Nixon Administration.  Congress had created a statutory framework to help structure the exercise of executive branch spending discretion.  But Nixon, misinterpreting nineteenth century practice, insisted he had inherent constitutional authority to “impound” – that is, not spend – government funds that he thought had been unwisely appropriated.

In the wake of Watergate and in response to Nixon’s abuses of impoundment power, Congress rebelled.  It said, in effect, that whatever authority presidents enjoyed to manage government funds was a consequence of authority delegated to the President by Congress, either implicitly or explicitly.  And to prevent any future claims of inherent presidential impoundment authority under the Constitution, Congress enacted the Congressional Budget and Impoundment Control Act of 1974 (ICA).

Simplifying things a bit, the ICA can be understood as dividing presidential decisions not to spend appropriated money into two categories – rescissions and deferrals.  Rescinding funds means never spending them; deferring funds means not spending them right away.

The ICA basically took away any presidential right of rescission.  If the President wants to cancel altogether some congressionally authorized spending, he must send his recommendation to Congress.  The rescission then occurs only if, within 45 days, Congress enacts a new statute approving the proposed non-spending.  In other words, unless Congress affirmatively approves the President’s decision, sooner or later, he has to spend the money Congress appropriates for mandatory expenditure.

In 1974, however, Congress treated deferrals differently.  Presidents could propose to defer authorized spending for a fixed period of time, and those proposals would take effect unless either the House or the Senate voted to override the proposal – a so-called legislative veto.  The problem with this arrangement turned out to be that legislative vetoes are unconstitutional.  So said the Supreme Court in 1983.

At that point, the question became:  Did the President now retain his authority to defer spending, no longer subject to a legislative veto?  The U.S. Court of Appeals for the District of Columbia Circuit answered, “Sometimes.”

Sometimes, that is, Presidents want to defer spending because they think Congress did the wrong thing in funding a particular project or activity.  Deferring spending on such programs really amounted to a policy objection to Congress’s approved programs or activities.  According to the D.C. Circuit, the Supreme Court’s decision to nullify legislative vetoes effectively took the President’s power of “policy deferral” away.  Congress would never have enacted any policy deferral authority in the wake of the Nixon Administration, unless it knew it could retain legislative veto authority.  In “law-speak,” “policy deferral” authority could not be “severed” from the legislative veto.

Sometimes, however, presidents want to defer spending because, however, unobjectionable a program, deferring spending is necessary to provide for unforeseen contingencies.  Sometimes, for example, deferred spending enables the government to achieve savings through unanticipated efficiencies or changes in program requirements.  Such “programmatic deferrals,” according to the Court of Appeals, were still permissible.  They were instances of good management, not policy resistance.

Reacting to this decision, Congress amended the ICA to reflect the policy-versus- program distinction.  The ICA now basically prohibits “policy deferrals,” but allows “programmatic deferrals.” The President may recommend deferrals to achieve savings or otherwise “to provide for contingencies.”  Such deferrals take effect unless Congress affirmatively legislates to overturn them – which, of course, the President may veto if he chooses.

So, this is where the President would stand on August 2 if informed that government spending at current rates cannot continue without further borrowing, which, in turn, would violate the statutory limit on incurring government debt.  The President could claim authority to defer government spending in such amounts as necessary to avoid further borrowing.  He would presumably cite as his legal authority 2 U.S.C. sec. 684(b)(1), which authorizes deferrals “to provide for contingencies.”

Of course, exercising his statutory “programmatic deferral” authority in this way would be deeply ironic; the President could select expenditures to defer or not defer only by making policy judgments about spending levels that are different from the policy judgments that Congress enacted in its appropriations Acts.  In the words of separation of powers scholar Louis Fisher:  “Recognizing a broad power of impoundment by the President to handle the federal government in the absence of a higher debt limit would permit the President to radically change budget priorities by deferring this but not that — precisely the same kind of power that got Nixon into trouble.”

And yet there seems no other option.  If there is not enough money in the till to pay all the bills that are due and further borrowing is impermissible, something has to give.  The idea that the Fourteenth Amendment empowers the President to unilaterally raise the debt limit is implausible.  The President has statutory authority to respond to contingencies; he would have to use it.

Because nothing in the ICA would instruct the President on what basis to choose appropriations to defer – that is, what commitments not to keep — he would have to decide, on his own initiative, what projects and activities to put on hold to keep from violating the law.  Congress would thus have tacitly abdicated to the executive branch a huge swath of the power over government fiscal policy that the Framers quite deliberately vested in Congress.  The results, for good government — and certainly, for government as know it — would be calamitous.

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