Treasury Secretary Geithner warns that if Congress doesn’t act to raise the federal debt ceiling, it would be “unthinkably damaging to the economy.” As Ezra Klein reports, the governments options would be grim. The federal government would have to default on some of its obligations and largely shut down by August 2 to remain in compliance with the debt ceiling. Government business would grind to a halt and the U.S. credit rating would suffer, with potentially catastrophic long-term consequences.
But it’s not clear that Congress can constitutionally impose a debt ceiling on the President. The debt limit we have now is the legacy of a 1939 law designed to allow the Treasury flexibility to borrow up to a certain limit. But Geithner and a number of constitutional scholars have questioned whether Congress can prevent the president from paying obligations that the government has already incurred. That’s because a passage in the Fourteenth Amendment—designed to prevent Southern politicians from repudiating Civil War debts—stipulates that “The validity of the public debt of the United States, authorized by law... shall not be questioned.” What exactly that means is a complicated legal question, but as Jonathan Chait writes, the clause was intended to prevent politicians from using the threat of default for political leverage—which is exactly what Republicans are doing now.
Simply ignoring the debt ceiling isn’t much of a plan, although it might be better than actually allowing the government to default on its obligations. Such a move would trigger a high-stakes constitutional struggle with Congress. Democrats and Republicans would both be taking huge political risk in such a conflict—and the conflict alone might be cause markets to lose faith in the governments financial commitments.
While the law may be unclear, it should remind us what is at stake. In a legislative history of the Fourteenth Amendment, Jack Balkin quotes Sen. Benjamin Wade (R-OH), who fought for the debt clause. “Every man who has property in the public funds” Wade said, “will feel safer when he sees that the national debt is withdrawn from the power of a Congress to repudiate it and placed under the guardianship of the Constitution than he would feel if it were left at loose ends and subject to the varying majorities which may arise in Congress.”
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