Updated with a new Postscript at 1 pm Eastern Time
[Below is another guest post on the Debt Ceiling by Harvard Law Professor Laurence Tribe. In the interest of getting to closure, Professor Buchanan will let this be the last word on this exact topic for now, although he'll be back on Friday with some thoughts on other aspects of the debt ceiling and budget debate. Now here's Professor Tribe:]
In his latest post Professor Buchanan again argues that the debt ceiling violates the Constitution. Responding to my recent post to the contrary, he says I “ignore [his] actual argument,” according to which “the current political crisis is premised on the fact that the current debt limit will be binding” in the sense that, but for that statutory limit in 31 U.S.C. § 3101, the Treasury as of August 3 “would otherwise be legally authorized to borrow money in excess of the current debt ceiling” (emphasis added). That, Professor Buchanan maintains, is “the only way for the current standoff to have any meaning,” for if one does not assume independent borrowing authority on which the Treasury could rely once the debt limit was disregarded (presumably pursuant to presidential order), there would be “no reason to have this debate, because the federal government would not be on the brink of engaging in spending that exceeds the debt limit.”
With all respect, this formulation is deeply confused and question-begging. The key word in the sentence just quoted is “spending.” And the “current standoff” has not arisen because, but for the debt ceiling, the Treasury would have independent authority, attached to various spending measures, enacted after Congress’s enactment of the $14.3 trillion ceiling, to borrow money in excess of the ceiling in order to satisfy federal bondholders and meet the government’s other obligations. Were that the case, nobody would be focusing on the statutory ceiling in the first place because it would, for all practical purposes, already have been lifted by more specific, subsequent measures. The standoff has arisen because (1) but for the statutory debt ceiling, the Treasury would have authority to spend money beyond what would then be in the Treasury’s coffers; (2) the debt ceiling prevents it from obtaining the additional money by further borrowing, AND (3) the Treasury is not slated under current law to obtain that money from other sources of revenue such as taxation.
In other words, it is the combination of the ceiling and all other extant revenue-raising arrangements that would leave us with insufficient funds to meet all of the nation’s spending commitments come August 3.
It is essential for his argument that Professor Buchanan justify singling out one particular element in this combination of revenue-raising arrangements—the debt ceiling—as the cause of any default on the public debt and therefore as unconstitutional. He writes, “my statement about the debt limit is premised on the existing structure of both spending and taxation. If current tax laws do not provide sufficient revenues to cover current spending, then the only way to get the remaining money that must be spent is by borrowing it.” This claim echoes recent remarks by President Clinton, who (in embracing the "constitutional option") said that lifting the debt ceiling "is necessary to pay for appropriations already made" (emphasis added).Thus, Professor Buchanan arbitrarily takes one element of the “combination” of revenue arrangements—the tax laws—as his fixed starting point. If we hold the tax laws fixed, he argues, then the debt ceiling will be what stands in the way of raising enough revenue to avoid default; therefore, the debt ceiling must be unconstitutional.
This argument suffers from two fundamental flaws.
To begin with, there is no basis for treating the tax laws as fixed. One could just as easily argue instead: “If the current borrowing laws do not provide sufficient revenues to cover current spending, then the only way to get the remaining money that must be spent is by imposing higher taxes.” This approach would lead one to conclude not that the debt ceiling is unconstitutional, but that the laws fixing current tax rates and creating various tax loopholes are. Thus, Professor Buchanan’s argument still does not distinguish taxing from borrowing.
Worse still, even if we grant Professor Buchanan’s premise that the “existing structure of both spending and taxation” must be taken as fixed, his conclusion still would not follow. For Professor Buchanan is simply wrong in asserting that, “[i]f current tax laws do not provide sufficient revenues to cover current spending, then the only way to get the remaining money that must be spent is by borrowing it” (emphasis added). Contrary to Professor Buchanan’s suggestion, there are plenty of other ways to raise more money to cover current spending.
One example: printing the money necessary to cover all the nation’s spending commitments. Let us look at that option further. Just as there is a debt ceiling limiting the amount of money that can be borrowed, there is also a currency ceiling limiting the amount of banknotes that can be printed. Compare 31 U.S.C. § 3101 (“The face amount of obligations issued under this chapter and the face amount of obligations whose principal and interest are guaranteed by the United States Government … may not be more than [$14.3 trillion]”) with 31 U.S.C. § 5115 (“The amount of United States currency notes outstanding and in circulation … may not be more than [$300 million]”). Therefore, even if we begin by taking the “existing structure of both spending and taxation” as a given, Professor Buchanan would still have another hurdle to surmount: why is it the debt limit that must fall, rather than the paper money limit?
Here is another option: the Treasury could mint coins to cover all the nation’s spending commitments. As Jack Balkin has pointed out, 31 U.S.C. § 5112(k) authorizes the Treasury to mint platinum coins in any denomination. Balkin suggests that the President could exercise this authority to mint a couple of trillion-dollar coins. By doing so, the President could put an end to the problem created when the Treasury’s revenues are insufficient to meet its spending commitments, without violating any existing federal law. If we accept Balkin’s interpretation of the relevant statutory provision, the central premise of Professor Buchanan’s argument—that default is guaranteed to occur under extant statutes come August 3—isn’t even true to begin with.
Of course, raising the debt ceiling might be a wiser move from a policy standpoint than simply printing more money or issuing new forms of currency. But this is not a constitutional distinction on which Professor Buchanan is entitled to rely in order to pronounce the debt ceiling unconstitutional, while leaving the ceiling on outstanding currency notes—and other elements of our revenue-raising arrangements—intact.
But Professor Buchanan is not finished yet, for a further argument rears its head in the concluding paragraphs of his post. Professor Buchanan cites Perry v. United States for the proposition that the "validity of the public debt" "embrac[es] whatever concerns the integrity of the public obligations." According to Professor Buchanan, "the Perry language about 'the integrity of the public obligations' is not merely aspirational. ... '[T]he validity of the public debt' can be brought into question by much more than simply failing to pay narrowly-defined debt. ... Failing to pay people who are owed money, when due, under current law casts serious doubts on the government's reliability as a debtor. ... This means that there can be no prioritization of payments ... under the Constitution."
What is Professor Buchanan driving at here? As far as I can tell, his contention is that prioritization is impermissible because it would "cast serious doubts on the government's reliability as a debtor," thereby impairing the "integrity of the public obligations" and questioning the "validity of the public debt." The implicit premise here is that any action that "casts serious doubts on the government's reliability as a debtor" must be unconstitutional.
(1) The Perry language on which Professor Buchanan relies isindeed dictum, contrary to his suggestion that the language cannot "easily demoted to dictum status." The Perry Court held that "the facts alleged by the petition fail to show a cause of action for actual damages." 294 U.S. 330, 358 (1935). Thus, anything the Court said about the meaning of Section 4 cannot be part of the Court's holding. Indeed, Justice Stone—who provided the fifth vote for the Court's judgment—noted that much of the Court's analysis was "unnecessary." He therefore refused to join "so much of the opinion as may be taken to suggest that ... although there is and can be no present cause of action upon the repudiated gold clause, its obligation is nevertheless ... superior to the power to regulate the currency" 294 U.S. at 361 (Stone, J., concurring).
(2) Even if the Perry language were a holding, it would not justify the premise that whatever casts doubts on the government's reliability as a debtor violates Section 4. If a debtor's "reliability" were reduced, its ability to obtain favorable interest rates for future loans would be harmed. But the "validity" or "integrity" of its already extant debts or obligations would not in any way change.
(3) In any event, there are no evident limits to Professor Buchanan’s proposed rule under which anything that "casts serious doubts on the government's reliability as a debtor" would violate the Constitution. Running huge budget deficits in any given year might make creditors question the government's reliability (witness Greece); would Professor Buchanan argue that any sufficiently large annual deficit violates Section 4? A failure on the part of politicians to reach a deal on the debt ceiling within a few days might also make creditors question the government's reliability; would Professor Buchanan argue that President Obama and the Senate would violate Section 4 by rejecting whatever debt ceiling measure emerges from the GOP-controlled House of Representatives? The absurdity of these results suggest just how strained is the interpretation that produces them.
(4) In the same vein, I would also note that racking up enormous levels of aggregate debt could also cast serious doubts on the government's reliability as a debtor. The more debt one incurs, the more interest one must pay later; the more interest one must pay, the harder it will be to raise the money necessary to pay that interest; the harder it is to raise the money necessary to pay interest, the more probable default becomes; the more probable default becomes, the less reliable one is as a debtor. Thus, like the ouroboros, Professor Buchanan's argument ends up swallowing itself: in the attempt to show that the present debt ceiling is unconstitutional, his argument ends up showing that the Constitution would require a cap on the amount of debt that may be incurred after all.
I should add that, while I continue to believe, for all the reasons explained above, that one cannot logically claim that the ceiling on total U.S. public debt, as opposed to other aspects of federal law that equally limit the amount of revenue the Treasury is collecting, is “the” cause of whatever default is projected to occur on Aug. 3 and is, on that account, a violation of Section 4, I would certainly acknowledge that there is a dramatic psychological difference between the debt ceiling and the mix of tax and spending laws that are expected to combine with that ceiling in order to cause a default unless corrective action is taken by Aug.2.
To see that this is so, one need only note that the underlying legislation authorizing the floating of new bonds by the Treasury would remain in place and wouldn’t need to be expanded or creatively enlarged upon once the ceiling were erased or, less extremely but more creatively, raised by (say) $1 or $2 trillion. The borrowing infrastructure, in other words, is already in place and, when we are about to hit the ceiling, that underlying infrastructure wouldn’t need to be creatively rewritten or reconstructed by a president determined to employ the so-called “constitutional option” in order to crash through the ceiling without causing any concrete disturbance or fiscal discontinuity. For the president to promulgate any specific higher debt ceiling on his ownwould no doubt look too much like legislation and so isn’t an option that’s on the table. What a president purporting to exercise the constitutional option would do, I assume, is direct the Treasury Department to shut its eyes (at least for the time being) to the one-line statutory restriction of $14.3 trillion (as written in 31 U.S.C. §3101) upon the underlying legislation that would otherwise entitle the Treasury to keep borrowing as though nothing had happened. Nothing resembling a presidential enactment of altogether novel borrowing authority would be required.
The situation would closely resemble one in which the underlying legislation authorizing borrowing by the Treasury hadn’t been supplemented, beginning in 1917, by the enactment of any dollar ceiling at all but had instead been drafted with a sunset clause – one saying that the Treasury Department is authorized to borrow money by floating redeemable bonds in any chosen face amount and at any chosen interest rate, and without regard to the size of the aggregate U.S. public debt – but only through August 2, 2011, after which the borrowing authority automatically expires.
Erasing or simply ignoring that sunset clause in order to continue floating bonds beyond August 2 so that the U.S. could continue to pay its debts and meet its obligations would, to be sure, constitute a formally legislative act. (I set aside the fact that it might be a more transparently futile act than continuing to float bonds once the aggregate debt exceeds $14.3 trillion because, one supposes, the purchasers of U.S. bonds issued after the expiration of a preexisting sunset date might be even more nervous about whether those bonds are worth the paper they’re written on than would the purchasers of bonds issued after the aggregate dollar ceiling had been reached.) But I can understand those who might be tempted to say that such an act – whether ignoring a sunset date, or ignoring an aggregate dollar ceiling – wouldn’t be truly comparable to the kind of legislative act that raising tax rates, for example, would entail. If the president could raise those rates by 1% on his own, then he could double them on his own, and we’d be off and running. But permitting the president to ignore a limitation on the executive’s borrowing authority that would, if obeyed, cause a violation of the Constitution if all else were held constant feels somehow different.
Courts have certainly been known to sever constitutionally troublesome parts of legislation in the course of exercising their undoubted Article III power to remedy proven constitutional violations in circumstances where the result of doing so has been to extend the reach of legislation beyond its originally enacted scope; perhaps the executive branch should be deemed to enjoy a parallel remedial power even though it is to Congress that Section 5 of the Fourteenth Amendment specifically entrusts the task of rectifying violations of other parts of that Amendment. Perhaps it is that “simply” erasing either a financial ceiling or a sunset clause – “severing” such a ceiling or clause from the underlying borrowinglegislation – at least has the feel of something distinguishable from a creative, affirmative exercise of lawmaking power. I suppose that the essence of my position has been that this intuition is only that – an intuition.
What makes me doubt that intuition in this circumstance is imagining intermediate cases, cases in which the proposed exercise of executive authority looks like it’s somewhere between “mere” disregard of a cap on dollars or “mere” disregard of a sunset clause and the other end of the spectrum, that of raising tax rates without permission from Congress.
Here’s such an intermediate case: If the president were to decide, for instance, to increase the flow of revenue into the Treasury by terminating all of the Bush tax cuts (or all of those tax cuts on taxpayers above a certain income level) a year or six months ahead of the time they are all slated to end under the congressional legislation now in place or, to take a case closer to the maximally creative end of the spectrum, if the president were to direct the IRS to terminate the real estate mortgage interest deduction, would one identify any such action as a mere erasure of a limit on revenue intake or would one describe it as a usurpation of legislative authority?
If we would have to conclude that an executive act to end the mortgage interest deduction, or even a presidential act to accelerate the termination of some or all of the Bush tax cuts, were continuous with a presidential act adding a 1% surtax on all federal income taxpayers, then it would seem to follow that presidential authority to disregard a sunset clause on incurring new debt is likewise continuous with such tax-hiking authority, and that presidential authority to disregard a dollar cap on aggregate debt is likewise on the usurpation end of the spectrum of possible executive actions.
I’m still waiting to see a convincing argument for distinguishing in principle between legislative restrictions on government borrowingauthority and legislative restrictions on government taxing and other forms of revenue-raising authority. I have to say that seems implausible to me, but I can’t rule out the possibility and thus would be interested in hearing/reading more.