Monday, January 14, 2013

Why The Debt Limit Fight Will Be A Political Face-Off With No Gimmicks Or Constitutional Crisis

In dealing with the upcoming debt limit crisis, President Obama will approach it in a fundamentally different way than he did back in 2011. But for a variety of very good reasons he will make it a straight up political face-off between the President on behalf of the people of the United States against a minority of Republicans in Congress who have recklessly threatened to put the country in default.

As he said in his press conference today "There are no magic tricks here, there are no loopholes." This reiterates what the President stated on Friday, through the Treasury, that he will not use the platinum coin option. That statement echoed his decision in 2011 that he would not use the 14th Amendment option. By these determination he has made clear will not circumvent the debt limit law by the use of one of several tactics that, while arguably legal, would be viewed by some as gimmicks, or that could develop into a significant Constitutional crisis. Moreover, he understands that the use of any of those options would merely delay the final day of reckoning. The debt limit must be increased and it is Congress' responsibility to do so.

To understand those issues we must first look at the debt limit law itself. There is a provision in the United States Code that limits the amount of money the United States can owe at any one time, and thus the amount it can borrow. It reads

31 USC 3101(b) The face amount of obligations issued under this chapter and the face amount of obligations whose principal and interest are guaranteed by the United States Government (except guaranteed obligations held by the Secretary of the Treasury) may not be more than $14,294,000,000,000, outstanding at one time, . . . .

That limit is modified by the provision of law enacted as part of the 2011 debt limit confrontation which gives the President the authority through successive acts to further raise the debt limit to $16.394 Trillion.

The Treasury reached that $16 Trillion limit at the end of 2012. Here is a comprehensive Congressional Research Service Report report explaining the history and operations of the debt limit. Since the end of the year, Treasury has used some "extraordinary" powers, such as canceling Civil Service Retirement Fund obligations, to keep paying the bills.

There have been three options under discussion. It has been argued the President could use the authority to mint a platinum coin in a trillion dollar denomination and use those funds to continue to pay the Treasury's bills. The second alternative was to use his authority to issue scrip that would be used to pay the debts of United States until the debt limit that could be raised and real dollars borrowed. The third option was for the President to simply say that he has the authority under the 14th Amendment, or some other constitution provision, to issue debt notwithstanding the fact that the issuance would exceed the amount of the debt limit law.

The President did not choose the first two options because, whether or not one thinks he has the legal authority to issue a platinum coin or issue scrip, the President knew that both internationally and domestically taking either of those actions would be viewed as a gimmick, a magic trick. More importantly, either of those actions would merely be kicking the can down the road. They would be giving the Congress an excuse to not raise the debt limit because the President would have continued to keep the country operating and the Republicans would have been let lose to fight the President in the courts and through impeachment hearings.

The third option was for the President to assert that the 14th Amendment gives him the authority, if not a requirement, to avoid default notwithstanding the debt limit. But this assertion would create a significant Constitutional crisis, a crisis between the President and the Congress as well as between the President and the Supreme Court.

Asserting this position is not the same as a conflict between two statutes, where the President interprets one statute as overriding another. Many people have suggested this possibility by arguing that the Congress has passed Appropriations Acts and that they require the President to spend the money appropriated, a requirement which conflicts with the debt limit law. That argument has little merit. There is no statute that says money that is appropriated must be spent if there is no money available. In fact, if you look at every appropriations Act the lead off language is ,
"That the following sums are appropriated, out of any money in the Treasury not otherwise appropriated, . . . . . "

"Any money in the Treasury." Very soon, if Treasury cannot borrow money and put it in the Treasury, there will only be two dollars in the Treasury for every three dollars of bills coming due.

Appropriations acts simply do not authorize let alone require the expenditure of funds that the Treasury does not have. There is no conflict between Appropriations Laws and the Debt Limit law. One tells Treasury how to spend money in the Treasury. The other limits how much can be borrowed to put money in the Treasury. This question is totally different than the question of whether the President can refuse to spend appropriated funds when such funds are available, which the Supreme Court has ruled to be unconstitutional.

Simply put, we are talking about the President having the power to unilaterally decide whether he will comply with laws that are duly enacted by Congress and signed by the President. Except for Nixon, no President has done that in this way since Lincoln suspended the Habeas Corpus provisions of the Judiciary Act of 1789. The action was challenged by a prisoner but Lincoln ignored a court decision which ruled the action Unconstitutional. Eventually, however, Congress essentially ratified his action.

It is important to point out that this is not the same as the President's decision to not defend the Constitutionality of DOMA, the Defense of Marriage Act. In the case of DOMA, the Constitutionality of the law had been challenged in court. The President decided that the law was no longer Constitutionally defensible and argued that position in court. However, he also announced that he would continue to enforce DOMA until the courts struck it down.

Also, this is not like the President's decision regarding Libya and the War Powers Act. While all Presidents have questioned the Constitutionality of the War Powers Act, all have generally complied with it. In the case of Libya, the President argued that he complied with the requirement for him to consult with Congress and that, in any event, the Act did not apply because we were not involved in hostilities. Whether one agrees or disagrees with the President's positions, he clearly did not take the position that he even though the Act applied he could violate it based on his determination that it was not Constitutional.

In contrast with those situations, in the case of the debt limit the President would be directing the Treasury to ignore a law that clearly applied to its actions based on his unilateral; determination of its Constitutionality. He would be doing so even though the law has not been challenged let alone held to be Unconstitutional by a court.

Virtually all legal scholars believe that the President has a duty to enforce the law regardless of what he thinks about it because all laws that are duly enacted are presumptively Constitutional. This is a basic tenet of our legal system that was referred to in the 6th Circuit Decision upholding the Affordable Care Act

The minimum coverage provision, like all congressional enactments, is entitled to a “presumption of constitutionality,” and will be invalidated only upon a “plain showing that Congress has exceeded its constitutional bounds.” . . . The presumption that the minimum coverage provision is valid is “not a mere polite gesture. It is a deference due to deliberate judgment by constitutional majorities of the two Houses of Congress that an Act is within their delegated power . . .(citations omitted).

No Court has held that the President has the power to issue a binding ruling that any law, such as the debt limit, is Unconstitutional. Rather the courts have held that such power resides in the Supreme Court. Since the 1803 case of Marbury v Madison it has been accepted that only the Court can declare a law Unconstitutional. Unless that happens or until it is repealed, the debt limit is the law of the land.

Having rejected all other options, the President has decided to engage in a direct challenge to the Congress. He is not going to play games or kick the can down the road. And he certainly isn't going to give them ammunition to argue that he has exceeded his Presidential authority, which would create a sideshow of its own involving court cases and Congressional hearings. This is actually the boldest step he could take it is also the step most likely to succeed because it is a pure political challenge involving the power of a President who is just been reelected against a very unpopular Congress. As such it is by far the most likely to succeed.


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