Political vs. Constitutional Questions on Debt Default

ppnl asks, Also what if the president takes congress to court to have their refusal to raise the debt ceiling declared unconstitutional? Then the courts could order congress to either borrow the money or stop spending.

Or more likely, since there is no clear-cut undeniable constitutional violation, the Court calls it a political question and keeps their head low. There are at least two arguments to support the Court refusing to get involved.

The Issue is the Politics of Avoiding Default, not Whether to Default
First, neither side is defending default but just arguing over how to avoid it–that means the Court could moot the case by arguing there’s no real case or controversy, just a political debate over how to avoid default. Congress is neither requiring nor demanding the executive branch not pay the debt–the President can avoid default by accepting Congress’s demands. I don’t think that issue has been stressed enough. The President’s hands are not tied on this; he just has to accept what is to him a politically unpalatable policy. I’m not defending the Republican proposal or arguing that the President should accept it. I’m very much on President Obama’s side on this issue. But as long as he has a political option, no matter how unlovely, the constitutional question is entirely avoidable, and if default does come into play, his constitutional responsibility for that will be equal to Congress’s, even if his political responsibility is not.

The Government May Constitutionally Be Able to Temporarily Default
Second, the Constitution does not actually say the government can’t temporarily default. The only clear meaning of the 14th Amendment’s public debt clause is that the debt cannot be abrogated. If the government fails to pay in a timely manner, but fully intends to ultimately honor its debt, it’s not clear to me that they have violated the Constitution. The validity of the debt has not been questioned.

Constitutional interpretation on this issue might revolve around the length of the default period. To consider the extreme alternatives, I can’t see the Court saying a payment that posts to someone’s bank account one day later than legally required due to Congress coming to agreement a day late or the President not signing in a timely manner reaches the level of a constitutional violation, but I can see the Court saying that a statute delaying payment of a currently due debt payment for the succeeding 100 years is a constitutional violation. (The issue of whether interest continues to accrue may be relevant to an actual ruling, but that’s more detail than I want to consider here).

That doesn’t mean debt-holders are screwed in the case of temporary default. The government has a legal obligation to them, and debt holders would be harmed (in the legal sense) by delayed payment, so they would have standing to sue to be made whole. I would be surprised if they didn’t win such a lawsuit.

In summary, I think we have an exceptionally serious political crisis, but I am not persuaded that we’re dealing with a serious constitutional question.

About J@m3z Aitch

J@m3z Aitch is a two-bit college professor who'd rather be canoeing.
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7 Responses to Political vs. Constitutional Questions on Debt Default

  1. D. C. Sessions says:

    In summary, I think we have an exceptionally serious political crisis, but I am not persuaded that we’re dealing with a serious constitutional question.

    It’s not like there’s a crisp distinction.

    Brad deLong speculates that this takes us closer to a Parliamentary system, where the majority in the House can effectively dictate to the rest of the government by tying anything they want to be a “must pass” condition to a debt-ceiling extension. Keep running up deficits, and then when the bills come due attach the non-negotiable demands (which may include more tax reductions to keep the deficits going.)

    Taken to its logical limit, those demands could include abdication by the Administration and replacement of the sitting President and Vice President by the Speaker and Majority leader of the House. And with the people of the United States as hostages, it might work.

  2. James Hanley says:

    D.C., It sounds more like a return to the mid-19th century system of congressionally-dominated presidents than a shift to a parliamentary system. DeLong’s a bright guy, but as an economist he may not have found time (or interest) to become familiar with how institutionally weak presidents were in the mid-19th century (leading to Wilson’s famous critique of congressional government). At best it’s a small-c constitutional issue, rather than a large-C one. It is an interesting question, however.

  3. D. C. Sessions says:

    DeLong’s a bright guy, but as an economist he may not have found time (or interest) to become familiar with how institutionally weak presidents were in the mid-19th century

    You might be surprised. He’s actually a bit of an amateur historian; one of his criticisms of modern academic economics is that it ignores a great deal of work prior to about 1970 — and his favorite examples are from the early 19th century with pretty wide-ranging examples of events.

    Right now, by the way, he’s “liveblogging” WWII with at least something every day from the major player from 60 years ago to the day.

  4. James Hanley says:

    D.C.,

    I might be. Quite true. And it would only add to my already considerable respect for him. But the institutional relationships between Prez and Legislative in the mid-19th century is considerably more niche-like than WWII, and far more outside his area of general interest than pre-1970 economic thought would be. I’m not saying it’s impossible, just that it would be rather improbable (but not unwelcome, of course).

    But I think he’s missing the degree to which the current situation requires a critical mass–albeit not too large–of Representatives who share the same set of ideological commitments to the same fanatical degree. That happens occasionally, but not often, and generally fades away again. It’s far too early to make any assumptions that this might be a new, more permanent, phenomenon. Let’s wait until their constituents have had a couple of chances to punish them and have chosen not to. And if they do, there’s still a technically simple solution (albeit not necessarily politically simple), which is revising our practices of redistricting to reduce the number of safe districts.

  5. D. C. Sessions says:

    I quite agree that the ingredients are rare — not least, a President who is a spectacularly bad negotiator and spineless to boot (or else secretly collaborating with the Opposition against the middle.)

    All it would take to blow the deal would be a President (or Senate) with the huevos to call the bluff.

  6. ppnl says:

    Or more likely, since there is no clear-cut undeniable constitutional violation, the Court calls it a political question and keeps their head low. There are at least two arguments to support the Court refusing to get involved.

    Well if the government owes interest to someone and they sue then it seems likely that the court would order it payed. It also seems likely that that the president has standing to sue to force some method of payment preemptively. The court would likely refrain from deciding how the legislature would obtain the money. They can borrow it, they can tax for it, they can print it, they can shut down the military or they can sell off the statue of liberty. But I cannot see the court not ordering the debt be payed.

    BTW what are the consequences of simply printing money rather than borrowing it? I understand that it devalues the currency but quantitative easing is pretty much doing that anyway isn’t it?

  7. James Hanley says:

    ppnl, Agreed, the Court would order it to be paid. But that would be as much a contractual conclusion as a constitutional one, and because the Court prefers to make non-constitutional decisions instead of constitutional ones whenever it can, they’d probably stick to the contractual argument. And a non-constitutional decision would be entirely sufficient to make the plaintiff whole. So all that happens after the fact of delayed payment and on the basis of which individuals are harmed, and the Constitutional issue of fulfilling debt obligations never comes into play.

    The consequences of printing money are exactly what you suggest. The practical question is whether the Fed would actually allow it or would respond with measures that keep the money supply from growing.

    But as a constitutional matter, if Michael Heath’s argument about diminishing the value of government securities equaling default is taken seriously, then repayment through devalued dollars is no less default. And that’s a pretty good argument, objectively, but I just can’t see a court agreeing to it as a constitutional matter unless the devaluation was on something approaching the Zimbabwean or German hyperinflationary devaluations.

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