For President Obama, winning a short-term debt battle is not enough

In this commentary, Professor Neil H. Buchanan from George Washington University says political brinkmanship is much less important than resolving the debt ceiling question permanently—a lesson that may be lost on the Obama administration and others in Washington. 

Joint_Session_of_CongressOn this fourth day of the 2013 U.S. government shutdown, the latest news reports suggest that Republicans might soon, under political duress, both reopen the government and – much more importantly – stop treating the debt ceiling as a negotiating ploy.

For more than two years now, they have repeatedly threatened not to increase the debt ceiling without extracting significant concessions from Democrats.  Even if they back down now, there is every reason to believe that they will be all too happy to threaten economic chaos again in the future, when they think the political moment is right.

That continuing threat makes it all the more important to resolve the debt ceiling question permanently.

The Obama administration, while apparently winning the current political confrontation, has offered nothing to nullify the debt ceiling as a threat going forward.  The White House’s statements about its options, should the debt ceiling not be increased, suggest that they either genuinely fail to understand what the President would have to do in that situation, or they are deliberately engaged in an unnecessarily harmful and dangerous exercise in brinksmanship.

One recent political analysis about Obama’s strategic choices struck me as both insightful and frightening.

Jonathan Chait, a liberal analyst whose work I greatly admire, argued last Friday that the President must refuse to negotiate with the Republicans, lest they (continue to) view him as an easy mark.  So far, so good.  Chait then argued, however, that if the Republicans refuse to blink, Obama’s only option would be to allow the nation to default, and then to win the political war by blaming the default on the Republicans.

This, Chait concluded, is essential because “Obama is fighting to save his presidency.”

This chilling analysis, however, requires one to believe that Obama has exactly two choices: give in, or preside over a default.  That is simply not true.

A President has many choices

For over two years now, I have been arguing that people are wrong simply to presume that “cutting spending” is the only possible response to a debt ceiling crisis.  (My online writings are collected in my book, The Debt Ceiling Disasters, linked below.)

Simultaneously, Professor Michael Dorf and I have offered academic arguments supporting this conclusion in three articles published by Columbia Law Review (here, here and here), the first of which has recently been discussed widely in prominent news sources.

For example, on Monday of this week, the eminent Brookings Institution economist Henry Aaron wrote an op-ed in The New York Times in which he ably tracked our arguments and endorsed our conclusion that the President should refuse to allow a default by issuing as much debt as necessary to obey the spending laws passed by Congress.

One of the odd aspects of the debate over the debt ceiling, however, has been that there really has been nothing resembling a debate.

When Republicans and Democrats argue about, for example, the estate tax, each side presents logic and evidence supporting their side.  Republicans claim, among other things, that the estate tax creates an economic disincentive to innovate and create wealth.

Democrats claim that the estate tax at least mildly reduces the ability to transfer dynastic wealth across generations.  The evidence clearly favors the Democratic side on every sub-issue regarding the estate tax, but the point is that the Republicans actually make arguments, even in an ultimately losing cause.

When it comes to debt ceiling discussions, however, no one has even begun to make actual arguments against the Buchanan/Dorf position.  In a news analysis column in today’s New York Times, the reporter quotes a White House source as dismissing all arguments giving the President an alternative to outright default as “unicorn theories.”  And unfortunately, the arguments offered by academics have similarly been little more than drive-by snark.

For example, in the NYT column cited in the previous paragraph, Professor Michael McConnell completely steps outside of his area of expertise and blithely offers his opinion that “I don’t think anyone in their right minds would buy those bonds,” referring to Treasury securities that would have to be issued to avoid a default.

It is interesting, then, that Henry Aaron, who is one of the top public finance economists living today, endorsed our argument so completely.  In any event, McConnell’s mere surmise is unfortunately all too typical of the off-handed non-responses to our argument that we have seen throughout the last two years of non-debate.

Facing a trilemma

What, then, is our argument?  If the debt ceiling is not increased by October 17 (according to estimates from the Treasury Department), the President will face what we call a “trilemma.”  That is, the President will be constitutionally obligated to enforce three sets of laws that are mutually contradictory.

To use simple numbers, the President will have been ordered by Congress to spend exactly $10, and to collect exactly $7 in taxes, but to do so without borrowing any more money.  The spending, taxing, and debt ceiling laws cannot all be executed under such conditions.

It is true that one of the paths the President could follow is to violate the spending laws.  To do so, however, is to allow the United States to default on its obligations for the first time in its history.

Some people claim that “default” only refers to failing to pay principal and interest on the Treasury securities that constitute “the national debt,” but there is no basis in law or logic for that claim.

A GAO report (which has, inexplicably, been taken down from the web) noted that there is no legal definition of “default,” and then pointed out that Black’s Law Dictionary defines “default” as “[t]he omission or failure to fulfill a duty, observe a promise, discharge an obligation, or perform an agreement.”

Moreover, financial markets are clearly treating the possibility of federal nonpayment of any obligation as a confidence-shattering event.

The label that we apply to nonpayment of obligations, however, is largely beside the point.  What matters is that the President would violate his constitutional duty to execute the spending laws, if he were to decide not to make some or all of the required payments when they come due.

Some have suggested that the spending laws merely set a maximum amount to be spent, but not a minimum amount.  This is simply wrong, as can be seen by reading any spending law on the books.  Congress does not say, “Spend $x on NASA, or less, if you want.”  It says, “Spend $x on NASA,” full stop.

There is good reason for this.  The “impoundment controversy” in the Nixon Administration was one of several constitutional crises that revolved around “the imperial presidency.”

President Richard Nixon decided that he would simply refuse to spend some of the monies that Congress had appropriated.  After losing in the lower courts, the Administration saw Congress pass the Impoundment Control Act, making it unnecessary for the Supreme Court to weigh in.

But it is absolutely clear that the lower courts were correct, and the Act was surplusage that simply restated a core constitutional principle.  In any case, Congress made very clear that its powers to spend money involved not just suggestions but specific amounts.

Setting spending priorities

And a good thing, too.  Setting spending priorities is a quintessential legislative duty, involving tradeoffs and compromises that result in final appropriations that disappoint nearly everyone.  Each legislator, however, at least knows that the programs about which she cares the most will receive the full amount of money promised, just as she knows that the programs that she wished had been reduced will receive their full appropriation.  For the President to undo any of the tradeoffs to which Congress agreed would allow him to change the very nature of the government’s commitments.

Other than the baseless suggestion that spending laws are only upper limits, I have seen only one assertion that even resembles an argument that the President would not be violating the law if he were to spend less than full appropriations.

In the Times article that I noted above, Professor Laurence Tribe casually asserts that “Congressional spending directives to the President contain an implicit condition that, if the money just isn’t there to be spent, the President must make tough choices — prioritizing repayment of bondholders who have lent money to our country over those who have been promised payment under various sorts of entitlements, politically painful though that would be.”

To which one can only respond: How could anyone possibly know that?  Tribe’s argument is that Congress must surely have thought that, if the debt ceiling is reached, then the President must “make tough choices.”  As Professor Dorf argued on his blog today, Tribe’s argument violates accepted rules of statutory interpretation.

Beyond that, however, Tribe is actually merely restating his own preferred solution to the trilemma by calling it “implicit” in Congress’s spending directives.

But why not accept Tribe’s invitation to read into the law whatever one likes?  I am happy to assert that the debt ceiling law includes “an implicit condition” that it will not be binding if it would cause a government default and a market panic.

Congress must surely have thought that, if its own dysfunction somehow caused the President to have to choose unilateral action, then he would understand that it is OK for him to read an implicit exception into the debt ceiling statute.

For that matter, why limit oneself to the debt ceiling statute?  Maybe there is an implicit condition in the tax laws that allows the President to avoid a default and a debt ceiling violation by collecting more in taxes than otherwise authorized (maybe by requiring financial institutions to hand over estimated taxes on unrealized capital gains of all high-income clients).

And think what havoc we could wreak if we decide that the President could solve a trilemma by reading an implicit condition into the Fifth Amendment’s Takings Clause!

The point is that the attempt to solve the trilemma by asserting that one of its three parts is implicitly voluntary merely restates the trilemma: Rather than saying that the President has to choose which law to violate, we merely find ourselves saying that the President has to choose which law does not really say what it seems to say.  But any of the three laws – spending, taxing, or the debt ceiling – could be read opportunistically.

About the “least constitutional option”

That is why Professor Dorf and I refer to our exercise as a search for “the least unconstitutional option.”  We take seriously the laws that Congress has passed.  When those laws are mutually contradictory, we ask whether there are principles in the Constitution that can guide the President’s choice of which law to violate.

We identified three principles: (1) The President should take the path that involves taking upon himself the least amount of legislative decision-making, (2) The President should take the path that gives Congress the most ability to undo his decisions later, if they deem it necessary, and (3) The President should limit the “sub-Constitutional harm” of his decision, which means making sure that he does not do something that will harm the economy and society at large in the name of blindly following some abstract legal principle.

We then described how those principles lead to the conclusion that the President must obey Congress’s spending and taxing laws, even though that means disobeying its debt ceiling law.  Congress has given the President nothing but bad choices, but there is a way to figure out which one is least bad.

As I noted at the beginning of this post, the bigger worry is not that certain academics have offered nothing of substance to the discussion about Republicans’ use of the debt ceiling to hold the economy hostage.

The bigger concern is that the White House’s strategy this Fall defines success merely as winning the immediate standoff – or, in Chait’s terms, saving Obama’s presidency.  Obama’s presidency is important, but the stakes are much higher.

If the President merely succeeds in getting John Boehner to allow a vote on a “clean” debt ceiling bill next week, that does nothing to stop the next crisis from occurring.  By invoking Buchanan/Dorf now, the President would clarify matters once and for all.

And we must not forget that the current crisis could still get seriously out of hand, given Speaker Boehner’s obvious weakness as a leader of his party.

If Barack Obama finds himself on October 18 with a binding debt ceiling , he alone will bear the responsibility for what he chooses to do next.  Defaulting, and then blaming Republicans, probably would not even save his presidency.

But if it did, it would come at an enormous cost.  There would be no good choices, and surely serious risks in issuing sufficient debt to prevent default.  But the least bad choice, both constitutionally and practically, is to treat the spending and taxing laws as superseding the debt ceiling.  Our future depends on it.

Neil H. Buchanan, an economist and Professor of Law at the George Washington University, is the author of The Debt Ceiling Disasters: How the Republicans Created an Unnecessary Constitutional Crisis and How the Democrats Can Fight Back.

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