Thursday, July 28, 2011

We Sure Could Use an Advisory Opinion Right About Now

By Mike Dorf

Consider this another in my occasional series that might be titled something like What's Wrong with our Constitution.  A couple of weeks ago, I explained how the impasse over the debt ceiling would not arise in a parliamentary system of government.  Now to explain how the American conception of judicial review may be leading both Congressional Republicans and President Obama to keep driving straight ahead rather than swerving to avoid the collision.

First, a disclaimer: The metaphor of a game of "chicken" to which I have just alluded is almost entirely misplaced, because Obama and the Senate Democrats have already conceded an enormous amount to the Republicans.  Recall that in the past, the debt ceiling was simply raised.  The only reason we are even at an impasse is because of the Republicans' decision to use the occasion of the debt-ceiling bill as an opportunity to extract spending cuts that they were unable to achieve during the ordinary budget process.  Both the Senate bill and the President's negotiating position from the beginning have accepted the framing: They are willing to make very substantial budget cuts.  The key issues that have divided the parties are whether the cuts are accompanied by much smaller revenue increases and how much the debt ceiling is raised.  Passage of the Senate bill or acceptance of the "grand bargain" President Obama was offering Speaker Boehner last week would represent a gigantic policy victory for the Republicans.  So in an important sense, President Obama and the Congressional Democrats have already swerved.  But having done so, they found that the Republicans swerved right with them.  So the question now is whether either party will swerve out of the way, given their new trajectories.

Okay, enough of the game-of-chicken metaphor.  Now let's think about the situation more straightforwardly as a negotiation.  An important factor in whether parties to a negotiation reach a deal is how they perceive the alternatives.  In general, the more that their predictions align, the more likely they are to strike a deal.  Consider  settlement negotiations between the parties to a lawsuit.  Let's say that the plaintiff predicts that going to trial has a net positive value of $1 million.  Just to make up some numbers: Plaintiff thinks he has a 50% chance of establishing liability, and that the most likely damages figure is $2.2 million, so the discounted value of winning is $1.1 million minus costs of litigation, which he estimates at $100,000.  Now let's suppose that the defendant has the same estimates and costs.  If so, the defendant should be willing to offer a settlement up to $1.2 million (the discounted expected cost of losing at trial plus the expected litigation costs), and so the case should settle for something between $1 million and $1.2 million.  But what if the defendant thinks it much more likely that he'll win at trial?  Let's say the defendant thinks there's only a 1 in 4 chance of losing at trial.  If so, he'll offer no more than $650,000, which the plaintiff will reject as less than his expected value at trial (assuming no risk aversion).  The case won't settle.  In order to encourage settlement, the legal system has invented a number of ways of bringing the parties' respective evaluations of the case closer together, such as mini-trials.

To be sure, even when parties have exactly the same view of the probabilities, they may not settle.  In the first scenario, we can imagine that the defendant offers only $1,000,001.00, but the plaintiff refuses to accept.  Even though accepting the offer is better than going to trial, the plaintiff may feel that he's entitled to more than $1 of the $200,000 trial-avoidance surplus (that surplus being made up of the parties' collective saved litigation costs). Still, a case like this is much more likely to settle than a case in which the parties' views of the merits are far apart.

Now back to the debt ceiling negotiations.  Part of what's going on is the Republicans insisting on keeping all or nearly all of the surplus.  Another part of what's going on is that this is a multi-player negotiation, rather than a bilateral one.  But some piece of what's going on is different assessments of what happens in the case of no legislation being enacted.  The Republican leadership of Speaker Boehner and Senator McConnell appear to agree with the conventional wisdom that Republicans would be blamed for non-payment of Social Security, government shutdown, etc.  That's why they--and especially Boehner, who had a first-row seat to the 1996 govt shutdown--have been willing to cut a deal.  But I suspect that at least some of the Tea Party backbenchers think that President Obama would take more of the political heat for making the decision, for example, to pay bondholders but not elderly Social Security beneficiaries. Maybe they're right; maybe they're wrong.  However, so long as their political calculus differs substantially from that of the President, Congressional Dems, and their own leadership, they are likely to hold out.

Admittedly, the 14th Amendment option has not been at the forefront of the discussions among the main political players.  But it's there in the background, and it casts a lot of uncertainty--and therefore potential for divergent assessments--over how things will play out.  Suppose Obama decides to withhold Social Security checks, no doubt arguing that Republicans forced his hand.  A beneficiary then sues.  Will the courts say Section 4 of the 14th Amendment is justiciable?  If so, will they hold that Social Security benefits count as part of the "public debt" under Section 4?  If yes, what will be the remedy?  How long would it take the case to get to the Supreme Court?  Would there be an injunction in place pending review?  These and other questions all open the way to widely different views of the merits, and thus make a bargain less likely.

In many other constitutional democracies, at least some of these uncertainties could be resolved in advance through an "abstract" case.  Some U.S. state courts also have the power to issue "advisory" opinions.  But under longstanding practice and precedent going back to the George Washington Administration, our federal courts cannot issue advisory opinions.  In many contexts, we have found ways around that problem.  For example, if a private debtor were threatening not to pay his creditors, the creditors could sue for declaratory or injunctive relief in advance of the actual default.  But a challenge of the sort I'm imagining in advance of the stoppage of Social Security payments would be dismissed by the federal courts as unripe, and thus advisory.

The longstanding rule against advisory opinions is a fair, though not inevitable, interpretation of the Constitution's Article III and the broader principle of separation of powers.  But in times like these at least, it is a defect in our Constitution.