Oct 14

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How the Supreme Court can resolve the debt ceiling crisis



Posted 6 months, 11 days ago.

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Adam H. Rosenzweig from the Washington University School of Law proposes a different approach to ending the debt ceiling crisis: Let the Supreme Court resolve it as a Constitutional matter.

350px-Supreme_Court_US_2010What should happen when Congress and the President find themselves in a fiscal policy showdown resulting in a Constitutional violation? This question has risen to the fore in light of the recent political showdowns over the so-called “debt ceiling” crisis.

Some scholars have argued that there are no Constitutional options if the debt ceiling is not raised, meaning the president would be forced to choose the least unconstitutional option. Others have argued that the president has the power under Article 4 of the 14th Amendment to issue debt in contravention of the debt ceiling. Others still have argued that the president has inherent emergency powers under Article II of the Constitution to do so.

As most American schoolchildren learned in civics class, the United States government is composed of three branches: the legislative, the executive, and the judicial. If the legislative and executive cannot—or will not—comply with their Constitutional obligations, should the judiciary step in? In other words, what is the proper role of the Supreme Court in remedying Constitutional violations arising from fiscal policy showdowns, such as the debt ceiling standoff, between Congress and the president?

The Supreme Court engages with Constitutional issues arising from the coordinate federal branches all the time. When Congress enacts a law that violates the Constitution, the Supreme Court can strike down the law as unconstitutional. When the Executive violates the Constitution, the Supreme Court can order the Executive to fulfill its Constitutional obligations.

In the case of the debt ceiling, however, neither would suffice. Even if it wanted to, the Supreme Court couldn’t order the president to spend money that wasn’t in the Treasury nor could it order Congress to pass a statute authorizing new debt or cutting spending.

So in limited circumstances, such as those of the debt ceiling crisis, the sole remaining option would be for the federal courts, and the Supreme Court in particular, to impose taxes or borrow money to remedy the Constitutional violation.

While at first glance this may seem like an odd, or even outrageous, proposition, in fact the Supreme Court recognized the power of federal courts to do something strikingly similar over 20 years ago. In the case of Missouri v. Jenkins, the district court ordered the school district of Kansas City, Missouri, to undertake certain spending to comply with Brown v. Board of Education.

The school district attempted to pass a new tax to comply with the court’s order, but the state of Missouri adopted a state constitutional amendment banning the district from doing so. The district court found the state’s actions unconstitutional and therefore struck down the ban. Unfortunately, this was not sufficient to raise the money because the school district had never authorized a tax levy in the first place. So the court was forced to impose taxes and issue bonds directly. On appeal, although the details get somewhat complicated because of the state and local nature of school districts, the Supreme Court effectively held that such an order would be within the inherent power of the courts to remedy Constitutional violations.

This power of federal courts to raise and spend money is not unique in the history of the United States, nor is it limited to school desegregation. For example, courts have the inherent power to impose and collect fines from people held in contempt. But nothing in Article III of the Constitution, which vests the judicial power of the United States in the Supreme Court and the other federal courts created by Congress, says anything about a contempt power or a power to impose and collect fines. Yet it is well-accepted that such a power must exist or else the courts would not be able to fully exercise the judicial power.

Similarly, if a federal officer violates a citizen’s Constitutional rights, that citizen has the right to sue the officer for damages in a so-called Bivens action. The Supreme Court has made clear that, if the government loses a Bivens action, the fact that the government does not have enough money to pay cannot be a defense. Thus, by ordering the government to pay money damages that were not budgeted by Congress, the courts are effectively ordering the government to raise taxes or borrow money.

So in the debt ceiling crisis why not let the Supreme Court resolve it? If failure to raise the debt ceiling really would violate the Constitution and no other, more limited, remedies are available, the Supreme Court could invoke its inherent Article III fiscal powers to solve the problem.

Of course, some technical and procedural hurdles would need to be overcome for a debt ceiling case to reach the Supreme Court. But none of these should prevent such a case from making it to the Court.

At a minimum, the Social Security Trust Fund, one of the largest holders of federal debt, could sue for payment if the government threatened to default on that debt. Ordering payment on a debt is something the courts are particularly good at and, if failing to do so would result in the Fund permanently losing a portion of the value of the assets it needs to pay mandatory Social Security benefits, this would seem to establish the type of “irreparable harm” that typically justifies courts stepping in and doing so immediately.

But what about separation of powers? Would the Court be overly intruding into areas reserved to Congress in exercising the Article III fiscal power? Maybe yes and maybe no.

The Supreme Court has recognized a number of situations in which the federal courts can exercise powers that look surprisingly like legislative powers. For example, the Supreme Court has upheld the power of the federal courts to impose their own Congressional districts when legislatures can’t or won’t do so in a Constitutional manner.

Similarly, courts can decide how to manage and operate prisons, including which to close, what staff to hire, and how to fund them, to prevent constitutional violations. This was made explicit recently by the Supreme Court in Brown v. Plata, the California prison case, when it stated “Courts may not allow constitutional violations to continue simply because a remedy would involve intrusion into the realm of prison administration.” Replace “prison administration” with “fiscal matters” and we have the debt ceiling crisis.

But isn’t the Court supposed to stay out of issues committed to the political branches under the so-called political question doctrine? What could be more inherently political than a political showdown between the two democratically elected branches of government over fiscal policy?

This is true, to an extent. If the matter was one of a political debate over whether to engage in a new spending program, such an argument would be persuasive. With the debt ceiling, however, the political branches have painted themselves into a proverbial corner. By issuing debt and authorizing spending, the political branches implicated Constitutional protections they need not have. But once implicated, the fact that a political fight leads to the violation of these protections should not cloak the Constitutional violation behind the veil of the political question doctrine.

In an ideal world the political branches would solve the debt ceiling crisis on their own, recognizing that honoring the federal debt is a core commitment of the country. After all, part of the founding compromise soon after the ratification of the Constitution was for the federal government to assume the debts of the states incurred during the revolution, and part of the reconciliation after the Civil War was to mandate that the public debt not be called into question in the Constitution. But if the political branches can’t, or won’t, honor these commitments, the federal courts should.

Perhaps the Article III fiscal power has not been recognized until now because scholars assumed that a debt ceiling case would never get to the Supreme Court. Or perhaps some scholars did not equate the existing inherent powers of the courts as functionally equivalent to the government’s fiscal powers.

Regardless, in the face of the current debt crisis the recognition of a robust, but limited and well-demarcated, Article III fiscal power could potentially offer a way out of the policy and political stalemate facing the country. If both Congress and the president knew that failing to raise the debt ceiling would invite five justices of the Supreme Court to choose how to fund the government, the odds of a stalemate would likely reduce dramatically.

Perhaps the mere recognition of the existence of such a power could itself force the government out of its current rut, permitting the government to properly function once again within the Constitutional framework.

Adam H. Rosenzweig is a professor of law at the Washington University School of Law in St. Louis, and he concentrates his research and teaching in the area of tax law and policy. His latest research paper, “The Article III Fiscal Power,” is available on the Social Science Research Network.

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