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Thursday, October 3, 2013

Can the U.S. President Unilaterally Raise the Debt Limit?

Does the Fourteenth Amendment to the U.S. Constitution give the president authority to order the Treasury Secretary to raise debt above the existing debt limit? I contend such authority does not exist, at least as of 2013.

In December 2012, Jay Carney, the White House spokesman, had “flatly renounced the 14th Amendment option, saying: ‘I can say that this administration does not believe that the 14th Amendment gives the president the power to ignore the debt ceiling — period.’”[1] During October 2013, Wall Street, including investors and bank executives, was quietly coming to the opposite conclusion. Of course, fear of a declining stock market in the wake of a governmental default means that the financial sector has a strong financial interest in forestalling default by finding sufficient presidential authority in the Fourteenth Amendment.

   Are these Wall Street execs qualified, whether by virtue of their jobs or wealth, to advise the White House administration on matters of constitutional interpretation?   Image Source: Jason Reed/Reuters

“At the end of the day if there is no action and the United States has a default looming, I think President Obama can issue an executive order authorizing the Treasury secretary to make payments,” said David Kotok, chief investment officer of Cumberland Advisors. “There’s always been more flexibility in the hands of Treasury than they’ve acknowledged.”[2] Kotok could cite some lawyers teaching in American law schools who claimed that “the president could essentially ignore the debt limit imposed by Congress, because the 14th Amendment states that the ‘validity of the public debt of the United States, authorized by law,’ including for debts like pensions and bounties to suppress insurrections, ‘shall not be questioned.’”[3] Authorized by law is the key to unpacking the fourth section of the amendment. The relevant passage in the section states: “The validity of the public debt of the United States, authorized by law, . . . shall not be questioned.”[4] Let’s unpack it.

The validity of the debt incurred and being held by the Federal Government shall not be questioned. The reference in the section to debt incurred to suppress insurrection or rebellion provides a hint as to at least one of the section’s purposes. The amendment was ratified in 1868 in the wake of the war between the USA and CSA. Affirming the validity of the U.S. Government’s debt implies that the debt incurred by the CSA was not valid and thus not an additional obligation foisted on the U.S. Government. In any rebellion, moreover, the validity of the government’s debt is naturally subject to dispute, thus lessening its credibility even among citizens not in rebellion. So the section acts to fortify by exclusion the validity of U.S. Government debt. The question then becomes, which debt?

Is any debt that is incurred by the U.S. Treasury automatically to be regarded as valid? Here we have arrived at the crux of the matter. The “authorized by law” clause in the section qualifies the public debt that is valid to that which has been authorized by law. Having only a veto legislatively, the president cannot make law. That is the legislature’s task in the system of separated powers. Debt that is incurred without legislation passed by Congress—such as by an executive order by the president—is not valid because such debt is not “authorized by law.” In fact, section five gives Congress the “power to enforce, by appropriate legislation, the provisions of” the amendment.[5]

Obviously financial and political interests go into how various parties interpret the amendment. Even so, it is odd that rational beings would ignore “authorized by law” and conclude that an executive order is sufficient. Yet it is conceivable that given the severe economic and political impact of governmental default, some might argue as a political analyst has done that “(d)esperate times require desperate measures.”[6] In other words, the end justifies the means.

I suspect that Wall Street executives would find it rather easy to justify to themselves that the ends justify the means. In this case, the means involves overlooking a clause in the amendment’s fourth section, and thus violating logic and reasoning as if with impunity—as if knowledge itself were valid only where it serves a particular financial good.

1. Nelson D. Schwartz and Charlie Savage, “Wall St. Fears Go Beyond Shutdown,” The New York Times, October 2, 2013.
2. Ibid.
3. Ibid.
4. Legal Information Institute, Cornell University Law School (accessed October 3, 2013). http://www.law.cornell.edu/constitution/amendmentxiv
5. Ibid.
6. Nelson D. Schwartz and Charlie Savage, “Wall St. Fears Go Beyond Shutdown,” The New York Times, October 2, 2013.