Treasury Secretary Janet Yellen was very careful in how she responded to questions from George Stephanopoulos on Sunday about any contingency plans the Administration might have if Congress does not increase the debt limit before the Treasury runs out of cash. She said that there were no good options and that she did “not want to consider emergency options.”
The news media,
though, has been highlighting the use of the 14th Amendment to the Constitution
to allow the Treasury to continue issuing Treasury securities. In that
Amendment which was put into the Constitution in the aftermath of the Civil
War, there is the following sentence: “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.” There is some ambiguity here, and the phrase
“authorized by law” might be cited by those who do not believe that the 14th
Amendment provides a way to avert an economic disaster.
Laurence Tribe, a
noted Constitutional expert, used to believe that the 14th Amendment
was not a way for the Treasury to ignore the debt limit, but in a recent article in the New York Times, he explains why he has changed his mind.
“The question isn’t whether the president can tear up the
debt limit statute to ensure that the Treasury Department can continue paying
bills submitted by veterans’ hospitals or military contractors or even pension
funds that purchased government bonds.
“The question isn’t whether the president can in effect
become a one-person Supreme Court, striking down laws passed by Congress.
“The right question is whether Congress — after passing
the spending
bills that created these debts in the first place — can invoke an
arbitrary dollar limit to force the president and his administration to do its
bidding.
“There is only one right answer to that question, and it is
no.
“And there is only one person with the power to give Congress
that answer: the president of the United States. As a practical matter, what
that means is this: Mr. Biden must tell Congress in no uncertain terms — and as
soon as possible, before it’s too late to avert a financial crisis — that the
United States will pay all its bills as they come due, even if the Treasury
Department must borrow more than Congress has said it can.”
There has been speculation about the litigation that might
follow if the Administration were to invoke the 14th Amendment. I
wonder about that. First, I am not sure who would have standing to sue. I am
not sure if the Supreme Court would say that Speaker McCarthy by himself has
standing, and I am not sure if he got a vote on the House floor to litigate what
the courts would do. In any case, given the financial market turmoil that would
likely occur, I doubt that politicians would think that it would be in their
benefit to try to call into question debt the Treasury issued above the debt
limit.
Also, there are practical difficulties in considering that some
of the public debt is invalid. For example, Treasury issues 3-month and 6-month
bills every week. The 3-month bills, once issued, are indistinguishable from
the 6-month bills already issued which mature on the same date (technically,
the bills maturing on the same date have the same CUSIP number). There would be
no way to determine which of these bills when issued breached the debt limit if
Treasury issued an amount more than what it needed to pay off the maturing
bills.
I think the House would try to get at President Biden some
other way, perhaps even including commencing impeachment hearings. There is of
course no way that there would be enough votes in the Senate to remove him from
office even if there were enough votes to impeach him in the House.
There are of course other alternatives to using the 14th
Amendment which have been publicly discussed. We can all of course keep
speculating what the Administration would do if the Treasury runs out of cash;
all the options, including default, look bad. We don’t know, though, and we can
all hope that we don’t find out.
What makes the possibility of the debt limit not being
increased in time more worrisome than in past episodes is the weakness of the
Speaker. In order to pass a debt limit with whatever other language is
acceptable to 60 Senators and which the Administration can grudgingly accept,
Speaker McCarthy will likely need some votes from House Democrats to offset the
loss of votes from some House Republicans. Given that it only takes one member
to call for a vote “to vacate the chair,” McCarthy could well lose his position
if he chooses to put the debt limit legislation for a vote on the floor.
Of course, in October there could be a government shutdown
due to a failure to pass appropriation bills. We’ll get to see how that works
out after the debt limit issue is resolved one way or another.
