Skip to comments.Constitutional Nonsense. What the 14th Amendment really says about the debt ceiling/debt default
Posted on 07/09/2011 6:29:00 AM PDT by SeekAndFind
Lo and behold! As we celebrated this Fourth of July amid the debt-ceiling fight, the netroots and progressive pundits suddenly discovered the Constitutions relevance in fiscal matters. It doesnt seem like that long ago because it wasnt that long ago that they ridiculed the very idea of constitutional limits on Congress in economic policymaking, and even mocked the GOPs public reading of the Constitution at the beginning of the current session.
Of the new House rule requiring a statement of the constitutional authority for bills, Ian Millhiser wrote at ThinkProgress that the constitutional lunatics are now in charge of the GOPs asylum. It was completely unnecessary for Congress to cite constitutional justification for its actions, Millhiser proclaimed, because Article I of the Constitution gives Congress broad authority and leaves budgeting decisions almost entirely to the judgment of Congress.
But now that the GOP Congress is exercising this broad authority or rather, what has always been its basic authority over the nations purse strings to press for spending cuts as a condition of hiking the $14 trillion debt ceiling by another trillion or so, Millhiser, the Huffington Post, and The New Republic have suddenly discovered that in at least this one instance, the Constitution supposedly limits Congresss economic powers. Section 4 of the 14th Amendment, which states that the validity of the public debt of the United States, authorized by law . . . shall not be questioned, makes the debt ceiling itself unconstitutional, their argument goes. Folks who were railing against the unitary executive a few years ago now argue that if Congress doesnt give Obama what he wants, this section gives him the constitutional authority to issue new debt by himself; otherwise, there would not be enough money to pay the existing debt, and the 14th Amendment does not allow that.
Just a few months after arguing majestically about how the Constitution puts virtually no limits on the judgment of Congress, Millhiser now hopes the White House begins seriously exploring whether the Constitution will save Americas economy from the GOPs extortionary tactics. And David Dayen of FireDogLake, who thought it was silliness for members of Congress to read the Constitution in its entirety at the start of the session, now thinks its okay to read this one little section. He urges Democrats to stop tussling with Republicans over spending and taxes and just go with a strategy that works: reading the Constitution.
But this tortured interpretation of the 14th Amendment actually shows why members of Congress as well as the pundit class should have participated in the public reading of the entire Constitution earlier this year. If they had done that, they might not have skipped over an essential passage regarding the power to borrow. Article I, Section 8 the same part of the Constitution that gives Congress the power to tax, appropriate, and regulate commerce . . . among the states (long the Lefts justification for any regulation of activity, or in the case of Obamacare, the inactivity of not buying health insurance) also explicitly states: The Congress shall have power to . . . borrow money on the credit of the United States.
The 14th Amendment doesnt affect this power one bit. It applies only to debt authorized by law, and as Catholic University Law School distinguished scholar John S. Baker wrote recently in NRO, Only Congress not the president makes law.
What it perhaps does do based on one Supreme Court case is require the Treasury Department to prioritize payment of existing debt to bondholders over other spending in the event the debt ceiling isnt raised. So if the government finds itself short on cash, it has to keep paying the bondholders and find the necessary savings in some other part of the budget. This is exactly what conservatives like Sen. Pat Toomey (R., Pa.) have been trying to codify through legislation. As Michael McConnell, the distinguished director of the Stanford Constitutional Law Center, has put it, the real effect of Section Four of the Fourteenth Amendment is almost the opposite of what hopeful voices in Washington are saying.
Heres why Professor McConnell is right:
1. The debt ceiling is a consolidation of borrowing authorization that Congress has always exercised.
When reviewing the debt ceilings constitutionality, its important to recognize that what is now called the debt ceiling or debt limit was actually created as an expansion of the Treasury Departments ability to borrow, rather than a constraint on it. As the Congressional Research Service noted in a 2008 report, before World War I, Congress authorized specific loans and allowed the Treasury to issue specific types of debt instruments.
This practice in which Congress approved specific loans and debt instruments did not change in the five decades after the adoption of the 14th Amendment in 1868. As the CRS report noted, Congress approved specific borrowing to finance construction of the Panama Canal in the 20th centurys first decade. It wasnt until the Second Liberty Bond Act of 1917 that, as the report describes, Congress enacted aggregate constraints on certificates of indebtedness and on bonds that allowed the Treasury greater ability to respond to changing conditions and more flexibility in financial management.
But what hasnt changed is the constitutional requirement that the dollar amount of the nations borrowing can be approved only by Congress. As McConnell put it: The debt ceiling is simply the limit Congress has imposed on how much money the country may borrow. The executive branch cannot constitutionally borrow a dime in excess of this amount.
2. Perry v. United States may require paying bondholders first, but it does not allow the issuing of new debt without congressional authorization.
So far, the new constitutionalists have found just one Supreme Court case that purportedly supports their case for borrowing without congressional authorization: Perry v. United States, 294 U.S. 330 (1935), a case challenging the Roosevelt administrations repudiation of a gold clause in a U.S. bond. But the Courts opinion in this case reaffirms that only Congress can approve the issuance of new debt. In authorizing the Congress to borrow money, the Constitution empowers the Congress to fix the amount to be borrowed and the terms of payment, the Court stated.
The Court also ruled that the U.S. government cant shirk its obligations to bondholders from existing debt, a point that, if held as binding precedent, works to conservatives advantage. As Professor Baker noted, the ruling is somewhat ambiguous. The plurality opinion did not rule that the plaintiff was entitled to payment in gold, but merely upheld the obligation of the government to pay the bondholder in legal tender currency, which was the government was already offering.
Nevertheless, the case did hold that the 14th Amendments language concerning the validity of the public debt went beyond the Civil War debt that had been one of the amendments motivating factors. Having this power to authorize the issue of definite obligations for the payment of money borrowed, the Congress has not been vested with authority to alter or destroy those obligations, the court ruled.
Given the Courts ruling in this case that while only Congress can approve new borrowing, the government is obligated to pay existing debt, it is plausible to argue that the Constitution requires the Treasury Department to set up debt-ceiling contingency plans along the lines proposed by Senator Toomey in his Full Faith and Credit Act. By ensuring that creditors are paid first, this law would both fulfill the governments obligations under Perry and reassure the market that a breach of the debt ceiling does not mean a default. And as Toomey has noted, with roughly 10 times more income than needed to honor our debt obligations, there is little danger of default if the debt-ceiling hike is delayed.
3. Public debt does not include government benefits, the Supreme Court has ruled.
Progressive constitutionalists argue that the term public debt embraces every transfer payment of every spending program under the sun. But the Supreme Court has already shot down the argument that government benefits even if they are labeled entitlements represent contractual obligations. In Flemming v. Nestor, 363 U.S. 603 (1960), the court ruled that a deported member of the Communist party did not have any earned rights to his Social Security benefits, and neither did other recipients. Calling benefits a noncontractual interest, the Court declared, To engraft upon the Social Security system a concept of accrued property rights would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands.
Ironically, proposals for personal accounts championed by center-right groups would give recipients a contractual interest in some of the taxes they pay, but the Left shot this down in favor of keeping Social Security as a pay-as-you-go Ponzi scheme with guarantees not worth the paper they are written on.
Despite the obvious hypocrisy of these newfound defenders of constitutional limits, they have the chutzpah to attempt to tar the tea-party movement with hypocrisy if conservatives and libertarians dont profess absolute fealty to this new constitutional theory. But genuine constitutionalists should respond simply that all parts of the Constitution should be honored, and that Article I and the 14th Amendment do not conflict with each other.
The Constitution places a burden both on borrowing and on default of valid existing debt. As difficult as they may make the legislative process, both provisions serve to prevent short-term and long-term fiscal catastrophe.
John Berlau is director of the Center for Investors and Entrepreneurs at the Competitive Enterprise Institute. CEI counsel for special projects Hans Bader provided invaluable insights and assistance with this article.
The left hates the Constitution except when it can be twisted to serve its purposes. Obama is one appointment away from doing away with the document. One more Elena Kagan and the 14th amendment will come to mean incomes MUST be redistributed by the government.
No joke...this is coming.
Grasping at straws, aren’t they.
I think it’s a stretch to interpret the 14th Amendment as requiring the payment of interest on the debt before other payments are made, but it certainly doesn’t authorize the Executive Branch to issue new debt beyond that properly authorized by Congress under Article I.
What the 14th does do is forbid the federal government, Congress or the Executive, from voiding such properly authorized debt. That is, such debt can never be repudiated. This is not the same as saying that it can’t be subject to default, i.e., delayed payment.
Default is not the same as repudiation. Following a default, the borrower still owes the debt and can be pursued for it. If an individual repudiates a debt, say due to false documentation, misrepresentations, etc., and a court agrees with him, that debt is no longer owed.
The 14th simply states that, once issued, authorized debt cannot be repudiated, period. (Of course, given the track record liberals have for Constitutional interpretation, a future Supreme Court might try to do exactly that someday, using the same sort of tortured logic they are trying to use today, but in a different direction.)
The 14th amendment also says, very clearly, the congress has the power to enforce it by enacting laws. It says nothing about the president having the right to enforce it.
And, furthermore, if the XIV said what they claim it does, the President’s only course of action would be to pay the interest on the debt first, then the pensions, and only then spend what’s left over, if anything, on the functions of the Federal government.
As per the granted enumerated powers. That is all.
>>And, furthermore, if the XIV said what they claim it does, the Presidents only course of action would be to pay the interest on the debt first, then the pensions, and only then spend whats left over, if anything, on the functions of the Federal government.<<
The 14th doesn’t really say that. Again, it just states that we can’t repudiate legally authorized debt. It says nothing about a temporary default. As for pensions, it doesn’t put pensions (like Soc Sec for example) on a higher priority. What it does is put and DEBT issued to pay pensions (probably some debt already issued to cover Civil War pensions at the time) on the SAME priority as all other debt, i.e., it too can’t be repudiated. It does not refer to the payment of the pensions themselves. It instead refers to the debt issued to make the pension payments.
As long as we’re reading the 14th Amendment, consider Article 3 of that amendment which states:
“Section 3. No person shall be a Senator or Representative in Congress, or elector of President and Vice President, or hold any office, civil or military, under the United States, or under any State, who, having previously taken an oath, as a member of Congress, or as an officer of the United States, or as a member of any State legislature, or as an executive or judicial officer of any State, to support the Constitution of the United States, shall have engaged in insurrection or rebellion against the same, or given aid or comfort to the enemies thereof. But Congress may, by a vote of two-thirds of each House, remove such disability.”
Highlighting just the part I’m addressing, it would read:
“Section 3. No person shall...hold any office, civil or military, under the United States, who, having previously taken an oath,...as an executive...of any State, to support the Constitution of the United States, shall have engaged in insurrection or rebellion against the same... But Congress may, by a vote of two-thirds of each House, remove such disability.
Silly Question #1: Did Governor Perry take an oath to uphold the Constitution of the United States, and if so, was his call for secession of Texas from the United States sufficient to trigger the requirement that he not hold a national office, civil or military, without a vote of 2/3 of each House?
Serious Question #2: How many people presently working in the Obama Administration might this Article have direct bearing upon? Interesting, no?
The Left might yet come to regret digging into the 14th Amendment.
Just remember, the requirement for applying it is that the person must have previously sworn to uphold the U.S. Constitution while serving in a State or Federal capacity specified in the article.
That should have read: “what it does do is put ANY debt...” not “and debt”
Sorry for the confusion.
Good, timely, article.
I think it may well be the same if we are talking about the U.S. Congress and its power to tax. Congress is obligated to raise the money and not default. Failing to do its duty would be a repudiation.
When the Fourteenth Amendment states: "... shall not be questioned ...", I believe that those who ratified this amendment intended that Congress must exercise its authority to pay the debts. I don't think the amendment's authors would be amused by suggesting otherwise.
>>Failing to do its duty would be a repudiation. <<
Saying that doesn’t make it true.
In fact, failing to do its duty would be a default. The difference is that the holders of the debt would still have a claim on the U.S. Government. Constitutionally, we would be required to pay it...someday. The debt would not be repudiated, i.e, our obligation to pay it would not disappear.
I’ve said before that one way to get the Left off of this tack is to simply have the House pass a formal resolution stating that any debt Geitner and Obama issue on their own WILL be repudiated at the first opportunity. And add to the resolution that it will instead be the personal responsibility of the officials who signed off on the debt. That should put a complete stop to this nonsense.
By the way, we have defaulted temporarily on our debt in the fairly recent past, I believe...the 1970’s or so. That apparently didn’t raise a constitutional question at the time. The only reason we’re even talking about the 14th Amendment is because the Left is getting desperate about this debt ceiling business, knowing the House has them in a headlock and they’re finally going down for the count.
I certainly don't believe that. What would stop Congress from "defaulting" on whatever particular debt they chose for as long as they wished? You do agree, don't you, that Congress was being limited by the fourth clause? Why bother?
Section 4 was intended to define exactly which debts could not be repudiated, and which ones would have to be repudiated. It did not address default.
Remember, the Confederacy had issued debt during the Civil War. Section 4 makes it clear that debt issued by the United States could NOT be repudiated, but debt issued by the Confederacy, as well as debt claimed for loss of slaves via emancipation or otherwise, MUST be repudiated. It is even broader than that, however, stating that all debts incurred to aid in rebellion against us would always be repudiated. It doesn’t say a thing about default, because default is not repudiation.
If, for the next 20 years, Congress is stupid enough to not authorize payment of the interest on outstanding debt, we will be in default. However, they could do so. But according to the 14th Amendment, anyone holding that debt would never lose a claim to being repaid. In fact, a court would likely find that, upon repayment, full back interest would also be due.
Think about it. If some sorry sop of a Congress got the brilliant idea to pay off the Confederate debt today, or to compensate a bunch of Southern families for loss of their “property” via emancipation, they can’t. The 14th Amendment absolutely prohibits it. That was the primary purpose of Section 4, because those would have been huge issues following the Civil War. The rest is reassuring boilerplate, boilerplate that the Left is now twisting the meaning of in an attempt to get around the debt ceiling.
A Congress cannot be bound by the vote of a previous Congress. Anything they did can be overturned by the new Congress. They cannot, however, overturn the Constitution; only amend it following the procedures followed in the Constitution.
An excellent and timely article indeed!
Sadly, I don’t see anything good coming out of this mess. There isn’t a workable spine in the entire GOP, even among the freshmen, so I see little chance of anything positive coming in the next two weeks.
Wish I could be more optimistic, but we’ve been screwed so many times ...
“Having this power to authorize the issue of definite obligations for the payment of money borrowed, the Congress has not been vested with authority to alter or destroy those obligations, the court ruled. “
This one line will enslave us the minute democrats convert all the entitlement programs into flat debt and issue it like crazy during the periods in which they are in control.
It's not ironic at all, actually. It's a key part of the strategy of passive-aggressive budgeting. If one assigns the highest budgetary priority to the things which are most important and the lowest priority to those which are least important, the net effect will be that one's budget can be cut significantly significantly without having to cut anything overly important. This is the way budgeting is done in cases where one actually has to live with a fixed budget.
When the total budget is fungible, however, and the entity making the budget can demand as much money as it can "justify", the passive-agressive strategy is to give the highest priority to the least-important things, and the lowest priority to the most-important things (or at least those that will generate the most noise if they're cut). In that way, since eliminating any funding would mean eliminating an important program, no funding at all can get cut.
If SS were private accounts, the money would have to be accounted as "spent" the moment it was promised to someone, but politicians would no longer be able to manipulate the spending priority of SS payments as a means of "sheltering" other expenditures.
I would suggest that a proper balance would be to provide that the government may default on debt, but any new debt which is issued for any purpose other than the prevention or satisfaction of default must be subordinate to any debt which is currently in default. Of course, lenders would be limited in their willingness to buy debt which was subordinate to other debt that was already in default, unless they had reason to believe that the current budget deficits were temporary. I really doubt such conditions would exist under today's administration.
William F. Buckley's line was that they used shards of the Constitution to torment the rest of the Constitution.