Coalminers Wading Through Dead Canaries: The 2023 Debt Ceiling Debate
The financial security of the United States sits on a knife’s edge as a divided Congress and President Biden negotiate over raising the debt ceiling. Failure to reach a deal would be catastrophic. According to the Washington Post, a national default would result in “Federal workers furloughed. Social Security checks for seniors on hold. Soaring mortgage rates…(and) a global financial system sent reeling.” This last point in particular stands to harm America’s long-term global standing during a time of intense foreign competition. The U.S. Dollar is the reserve currency of the world meaning that Uncle Sam can borrow money with lower costs, a fact that makes Congress’s ability to spend more flexible. This financial freedom emanates from the fundamental security of the U.S. Dollar, a security that would be called into question were the government to default on its debt for the first time in our history. So, what does it mean for a country to default on its debt? What is being done to avert an economic catastrophe? And finally, what should be done to stave off such an economic blunder?
To answer the first question, it is important to understand how spending works in the U.S. government. Congress is endowed by Article 1, Section 8, Clause 1 of the Constitution with the right to levy taxes, duties, imposts, excises and to pay the debts of the United States, so long as all of those aforementioned costs are applied uniformly across the nation. Clause 2 of the same Article reserves for Congress the right to “borrow money on the credit of the United States.” These clauses, when viewed in conjunction with Article 1, Section 9, Clause 7, give Congress what is known as “the power of the purse,” or in practical terms the power to control federal spending. So, Congress can spend money but what creates a limit on the amount of money the Congress can spend?
Until 1917 there was no hard limit. However, with the passage of the Second Liberty Bond Act of 1917, the Treasury Department was allowed to take on certain Congressional debt, provided that the accumulated debt was below a ceiling set by Congress. In 1939 and 1941 Congress passed the Public Debts Acts which set more general limits on the debt of the country. It is under this paradigm that Congress continues to operate today: spending increases and Congress votes to raise the debt ceiling again and again. Why, then, is this time any different? At the time of writing the national debt of the United States of America is $31,792,808,224,000. This is why there is a looming default crisis; since the Reagan Administration spending has outpaced revenues by untenable margins. We reached the debt ceiling in January of 2023 and the Treasury is running out of “extraordinary measures” to keep the government afloat.
So then, what is being done to address these issues? Some academics like Lawrence Tribe, professor emeritus at Harvard University, have argued that a national default is unconstitutional via the 4th Section of the 14th Amendment to the Constitution and that President Biden has the constitutional obligation to simply ignore the debt ceiling. Amendment 14, Section 4 states that “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.” The novel legal theory goes something like this: if the validity of the public debt must not be questioned, and if a default questions the validity of the public debt, then a national default is unconstitutional under the 14th Amendment.
Under this theory, the Second Liberty Bond Act of 1917 would be unconstitutional and void and so Mr. Biden could simply ignore the ceiling. Mr. Tribe and his tribe also argue that using the threat of a default as leverage to negotiate is borderline treasonous, stating in an article published in The Hill that,
“It is more than a little ironic, against this backdrop, that the very (ironically named) rump Republicans now holding our national debt hostage hail principally from the same Jim Crow precincts that spawned the Confederate would-be defaulters whose threats prompted the ratification of the debt clause in the first place. Those who rub shoulders with white supremacists today are no more to be honored in their attempts to force a “national divorce” than were their slave-holding forebears 150 years back.”
With all due respect to a scholar of Tribe’s caliber, these arguments are ridiculous and uncharitable. While there certainly are bad actors within the Republican party, there is also a genuine desire to cut deficit spending and begin work on cutting the national debt that Tribe so clearly misses amidst the haze created by his barrage of ad hominem attacks. Failing to pay debts does not make the debt invalid in any sense of the word, it would certainly be horrible for the U.S. economy, but a default is clearly not unconstitutional.
Opposed to Mr. Tribe’s view is Michael McConnell, Director of the Constitutional Law Center at Stanford Law School, who argues in a New York Times Op-Ed that,
“Section 4 [does not] have anything to do with payment of the national debt. It does not make it unconstitutional for the United States to run out of money. Nice idea, but impossible. Section 4 prevents the only institution of government that could deny the validity of the debt — namely, Congress — from doing so. For the United States to fail to pay interest or principal on its debt would be financially catastrophic, but it would not affect the validity of the debt.”
Viewing the 14th Amendment through Tribe’s novel legal theory presents another problem: it makes the 14th Amendment an unconstitutional constitutional amendment. Professor of Law and Political Science at Yale University Akhil Amar argues that an Amendment that abolishes freedom of speech, for example, would be unconstitutional despite being ratified by Congress because it would contradict the 1st Amendment and all of the legal precedent surrounding it, in Amar’s words it would “leave standing only a disjointed, unworkably insufficient, fragmentary constitutional structure.” This is the effect that Tribe’s interpretation of the 14th Amendment’s 4th Section would have on the aforementioned Article 1, Section 8 which, in part, grants Congress the power of the purse. Mr. McConnell made the case in an MSNBC debate with Mr. Tribe that allowing the president to ignore this ceiling would grant him virtually unlimited unconstitutional powers to control the federal budget. Tellingly, Mr. Tribe himself only recently changed his mind on this issue, having argued the opposite of his current position in 2011 with respect to then-President Obama’s own negotiations with Congress over the debt ceiling back when the national debt was a mere $16,000,000,000,000.
Beyond the theoretical, what has been accomplished on the hill and at 1600 Pennsylvania Avenue to solve the looming debt crisis? President Biden and his Democratic allies in Congress have called for an immediate raise in the debt ceiling, arguing that a default would be catastrophic. To this call, Republicans in Congress have largely agreed, but they argue that there should be spending measures put in place so that we can get control over our national debt. On April 26th House Republicans narrowly passed H.R. 2811, the so-called “Limit, Save, Grow Act of 2023” by a margin of 217–215. This act would raise the debt ceiling by a further $1.5 Trillion or until March 31st, 2024, depending on which comes first. In addition to fulfilling Mr. Biden’s wish of raising the debt ceiling, the bill would limit discretionary spending, limit tax cuts for several so-called “green” initiatives, place work requirements on federal welfare spending necessitating recipients to work 80 hours per month to receive benefits, and the bill would lay out a spending plan through fiscal year 2033. The Committee for a Responsible Federal Budget, a non-profit based in Washington D.C., estimates that H.R. 2811 would save “$4.8 trillion through FY 2033, with about 4.2 trillion of policy savings and $543 billion of interest savings.”
Mr. Biden and his allies in Congress are not content with this plan, however. They want a raise in the debt ceiling with as few restrictions as possible on spending. A team representing the president met with Congressional leaders on Friday, May 19th to negotiate a settlement to this issue, however, talks rapidly fell apart. According to CNN, Rep. Patrick McHenry (R-NC) claims that there is still “a serious gap” between the two camps, and that “we’re in a tough spot.” Speaker of the House Kevin McCarthy (R-CA) is singing a different tune, however, saying of negotiations that “We’re not there… but I see the path.” Wherever Mr. McCarthy’s path lies, lawmakers should unearth it quickly: the default could occur as early as June 1st.
So then, what should be done? It is clear that a default would be catastrophic and so both sides are desperate to avoid it. However, Congressional Republicans feel that they can use the crisis to leverage new caps on spending as McCarthy called for in an interview on Fox News, stating that “there has to be (spending) caps, otherwise we’re just growing out of control.” Mr. McCarthy’s concerns are certainly reasonable, the only reason why Republicans are able to leverage the debt ceiling over Mr. Biden is because of reckless spending by both sides. While Mr. McCarthy’s offered solution in H.R. 2811 is certainly a partisan band-aid, it is a step in the right direction. On Mr. Biden's and the Democrat’s part, they could agree to limited versions of the desired spending cuts offered by Republicans in exchange for further cuts that Republicans would not prefer like repealing certain Trump-era tax cuts, long derided by Democrats. A willingness to play ball is going to require sacrifices from both sides: good government always does. There will be no miraculous escape, no interpretation of the 14th Amendment or some other voodoo political theory that will make this problem disappear: it will require good-faith negotiation on both sides, something Washington D.C. is not known for. We can only hope that necessity remains the mother of invention and that some positive long-term solution is reached expediently.
“If you see a snake, just kill it. Don't appoint it to a committee on snakes.” — Henry Ross Perot
