Litigating Debt Ceiling Plan B

by Michael C. Dorf

At his impromptu press conference after meeting with congressional leaders yesterday, President Biden said that he's "thinking about" Section 4 of the 14th Amendment as a Plan B in the event that no legislation raises or suspends the debt ceiling in the next few weeks, adding that he had come to that view because of the view recently expressed by Prof Laurence Tribe, who has long advised him on constitutional matters. However, Biden also said that the "the problem" with a unilateral presidential decision "is it would have to be litigated."

I count Biden's statement as substantial progress. I confess that at least a small part of my satisfaction is ego-driven. It's good to see Biden coming around to more or less the position that Prof Buchanan and I have long advocated: make utmost efforts to get legislation but if that fails, unilaterally issue debt in violation of the debt ceiling. It's also nice to see that our work seems to have played a causal, albeit indirect, role. The Tribe op-ed that apparently persuaded Biden closely followed the Buchanan/Dorf analysis, linking our 2012 Columbia Law Review article with the phrase "the most insightful literature" and citing no other scholarship.

To be sure, neither the Tribe op-ed nor the Buchanan/Dorf argument (in countless articles and essays) depends primarily on the 14th Amendment. As I noted earlier this year, the primary basis for unilateral presidential action in the event of congressional failure to raise the debt ceiling would be separation of powers. Still, as Prof Buchanan explained here last week, although the better argument makes the 14th Amendment unnecessary, an approach rooted in the 14th Amendment is not exactly wrong and is close enough to what we advocate that we would welcome the president's adoption of it. And Biden only referred to the 14th Amendment after a reporter specifically asked him about it. It's possible that he and his legal team would rely chiefly on separation of powers in any formal documents accompanying unilateral action.

The bigger difficulty is Biden's further assertion that such unilateral action raising the debt ceiling "would have to be litigated." I don't doubt that it would be litigated. As Tocqueville observed long before Ken Paxton and his ilk blighted the federal courts, "[s]carcely any political question arises in the United States that is not resolved, sooner or later, into a judicial question." But there's a difference between "would be litigated" and "would have to be litigated."

If the administration were to unilaterally "prioritize," i.e., unconstitutionally "cut" spending appropriated by law on the ground that the government has run out of borrowing authority, entities and persons to whom the appropriated funds are due would suffer a classic pocketbook injury that gives rise to legal standing to sue in federal court immediately.

By contrast, also-unconstitutional (but in the Buchanan/Dorf view, less unconstitutional) borrowing in excess of the debt ceiling does not clearly give rise to a justiciable case or controversy. Everyone owed money by law gets paid in full and on time. That everyone includes holders of bonds issued before the government hit the debt ceiling, so they would not be injured. And the new debt-ceiling-violating bonds wouldn't injure their entirely voluntary purchasers, who would receive an interest premium for the cloud over the legality of the bonds. Maybe the beneficiaries of pension funds and other institutional holders of bonds might bring contract suits against the funds for purchasing the debt-ceiling-violating bonds, but if the administration is worried about that possibility, there's an easy way to avoid it: sell the bonds only to the Fed. At that point, any complaint would be asserting a non-justiciable generalized grievance.

Thus, if the courts follow extant standing rules, unilateral borrowing in violation of the debt ceiling not only would not "have to be litigated." It wouldn't even be litigated beyond a lawsuit dismissed for lack of standing. But I acknowledge that's a big "if." One could well imagine a federal judge in a single-judge sub-district granting an immediate nationwide injunction on the ground that some plaintiff has standing because . . . reasons. Even if the Fifth Circuit (unlikely) or the Supreme Court (uncertain) were to stay the injunction, any period of delay could cause grave economic harm. So Biden's concern about litigation, though phrased somewhat imprecisely, is warranted.

Might it therefore be useful to get ahead of the curve and initiate litigation? What if someone who would definitely be injured by unauthorized unilateral presidential prioritization brought a lawsuit against Secretary Yellen now for declaratory and injunctive relief? Such a lawsuit could concede that notwithstanding the Supreme Court's invalidation of the Line Item Veto Act in Clinton v. City of New York, Congress could, if it specified a sufficiently intelligible principle for doing so, delegate to the president or a federal agency some power to prioritize various items of spending in a debt ceiling crisis. Nonetheless, the lawsuit would assert that, where, as here, Congress hasn't authorized prioritization or specified any principle for prioritization, the debt ceiling statute--if construed to allow prioritization--is unconstitutional.

That lawsuit, in my view, has real potential, and it's not hypothetical. It's exactly what was filed in federal district court in Massachusetts on Monday in National Ass'n of Gov't Employees (NAGE) v. Yellen. Crucially and helpfully, the complaint does not assert a cause of action under Section 4 of the 14th Amendment. Rather, it claims violations of separation of powers and the Fifth Amendment (because the assumption of vast prioritization authority by the president would be exercised in arbitrary ways that violate due process and equal protection). Best of all, from my perspective, if a court were to grant the relief sought, the conclusion would be that the debt ceiling is unconstitutional. The debt ceiling statute is currently codified separately from the borrowing authority statute. The court could rule that the former is unconstitutional (at least as applied) but that it is severable from the latter, leaving the executive branch's borrowing authority intact. Doing so would mean that borrowing in violation of the debt ceiling would not be the least unconstitutional option. It would mean that such borrowing is actually constitutional.

Too good to be true? Maybe. As with mifepristone and everything else, there is a risk that competing lawsuits filed in federal district court in Texas and/or other GOP-friendly venues could seek and obtain the exact opposite result. Even if the NAGE lawsuit succeeds at the district court and before the First Circuit, contrary rulings from other courts could cause delay and confusion, and even a relatively swift and helpful resolution by SCOTUS could come too late to avert enormous economic harm. Moreover, there is a substantial risk that the Supreme Court as currently constituted would be reluctant to rule for a Democratic President (though nominally the administration would be the defendant) in a high-stakes politically charged case.

Unilateral presidential borrowing in violation of the debt ceiling will be litigated. It already is being litigated in the sense that the NAGE seeks such borrowing as a remedy. But the administration doesn't have to wait for the outcome of litigation to take action. The president could and should continue to seek a political resolution, but he also could and should make clear that if an impasse is reached, he'll borrow in violation of the debt ceiling.