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July 7, 2011

12
P.M.

Could the 14th Amendment end debt ceiling negotiations?

Total Responses: 32

About the hosts

About the host

Host: Gerard Magliocca

Gerard Magliocca

Gerard N. Magliocca joined the faculty of Indiana University-Indianapolis School of Law in 2001 following two years as an attorney at Covington and Burling and one year as a law clerk to Judge Guido Calabresi on the United States Court of Appeals for the Second Circuit. Professor Magliocca’s research focuses on constitutional law and legal history. In 2007, his book on Andrew Jackson and the Constitution was the subject of an hour-long program on C-Span's "Book TV." His latest book, The Tragedy of William Jennings Bryan: Constitutional Law and the Politics of Backlash, was published by Yale University Press in 2011.

About the topic

Indiana University Law School professor Gerard Magliocca chatted about what exactly the 14th Amendment says, if President Obama could use it declare the debt ceiling unconstitutional, and if so, then how he could go about doing so.

Related: Obama, Democrats not ready to play 14th Amendment card with debt ceiling
Q.

Gerard Magliocca :

Hi everyone.  I'm looking forward to answering your questions.

Q.

14th Amendment

Isn't that the due process clause? (I'm a consumer lawyer and the 14th amendment doesn't come up much). How does it relate to debt ceiling?

A.
Gerard Magliocca :

No, this is Section Four of the Fourteenth Amendment, which says that "[t]he validity of the public debt of the United States, authorized by law . . .shall not be questioned."

– July 07, 2011 12:01 PM
Q.

Standing

Assuming that Obama goes through with declaring the debt limit unconstitutional and exceeds the ceiling, who would have standing to sue him in court? Regular taxpayers? Members of Congress?
A.
Gerard Magliocca :

Probably nobody.  It is very unlikely that this ever would reach a court.  If a default does occur, though, then the bondholders might be able to sue for damages.

– July 07, 2011 12:03 PM
Q.

Spending appropriations without issuing debt

Congress has (1) authorized expenditures through the fiscal year and (2) imposed a ceiling on debt that is insufficient to finance all of the authorized expenditures. Under these constraints, is there any statutory or Constitutional provisions that would prevent the President from ordering the Treasury to pay for expenditures consistent with Congressional authorizations without issuing new debt - in effect to print money to pay the Government's bills?
A.
Gerard Magliocca :

I think that the Treasury would first have to sell its liquid assets (for example, the gold in Fort Knox or our holdings of foreign currency).  The issuance of new debt could only occur if those reserves run out.

– July 07, 2011 12:05 PM
Q.

Who/What Could Challenge?

Is it true or false that Congress could not challenge Presidential Commander in Chief Constitutional actions under Section 4 of the 14th Amendment unless both House and Senate agreed to go to Court and that no one else has standing to do so? That is, unless the Senate and House jointly challenged the President in Court (not one legislative body acting alone), Congress' only remedy is ganshing teeth or seek to impeach.
A.
Gerard Magliocca :

Impeachment is probably the only remedy if Congress thought that the President had acted unlawfully.  Though you can bet that people will also make a big deal about that in next year's campaign.

– July 07, 2011 12:07 PM
Q.

Explanation?

You need to explain your view as represented by the Post that Obama would be " 'entitled to take whatever measures are necessary to pay...our debt at all times'," including "instituting new taxes or issuing more debt, regardless of what Congress says." How can you assert this without even mentioning Art.I, Sec. 8, which gives Congress sole authority to raise taxes, pay debts and borrow on the credit of the U.S.? Art. I, Sec. 8 is quite clear on where the power to do those things lies -- and it is not with the Executive. Your grade -- F.

A.
Gerard Magliocca :

Not even a gentleman's C? :)

Well, the Fourteenth Amendment prohibits Congress from defaulting on our debt.  So if all other funding is exhausted (a highly unlikely event), then something has to give.  Either the President must let Congress to break the law, or he must issue debt on his own authority and take the consequences.  Not a fun choice, I admit.

– July 07, 2011 12:09 PM
Q.

If it's not increased

Let's assume the debt limit is not increased. What is to stop the President from deciding to honor and pay off existing debt as it comes due, and use the remaining revenue surplus to pay for other expenses of government as he sees fit, meaning some operations would lose money from current levels, but many would go on as before?

A.
Gerard Magliocca :

I think this is what would happen.  This, by the way, would effectively give the President the power to impound money, which Congress says he cannot do.  That's another puzzle, though you could say that the Fourteenth Amendment trumps the Budget Act.

– July 07, 2011 12:11 PM
Q.

Penalty

What is the penalty if I question the validity of the Federal government's debt?
A.
Gerard Magliocca :

Luckily for people who are shorting bonds or buying credit default swaps on the United States, nothing.

– July 07, 2011 12:13 PM
Q.

14th amendment

It seems that section 4 "authorized by law" can be interpreted in different ways.
A.
Gerard Magliocca :

This is a good point, though the best reading is that this means authorized by law at the time the debt was issued.  If a new law could "deauthorize" existing debt, then the provision would be pretty meaningless.

– July 07, 2011 12:14 PM
Q.

Before the Constitution, the question of law

Why does the debt ceiling law take precedence over budget authorizations? What in the laws makes one subordinate to the other?
A.
Gerard Magliocca :

Well, the debt ceiling just closes off an important way of paying for the authorizations.  There are other sources of revenue (incoming taxes and selling assets) that can work for a while.  The constitutional problem only kicks in when those resources are insufficient.

– July 07, 2011 12:16 PM
Q.

Debt limit

Why doesn't President Obama just play the 14th amendment card and tell the Republicans he isn't bowing?
A.
Gerard Magliocca :

Bluffing that he would invoke this provision is one thing. Doing it is something else.  Who knows what he's saying privately.

– July 07, 2011 12:17 PM
Q.

Has something like this been invoked before in such a major crisis?

Have any past presidents invoked a Constitutional Amendment in a major battle with Congress before? I know about the War Powers Act, but that sounded more like Presidents ignoring Congress. This seems to be active defiance...
A.
Gerard Magliocca :

Well, Presidents have invoked the Commander-In-Chief Clause to do things not authorized by Congress.  Harry Truman, for example, tried to seize the steel mills during the Korean War and was smacked down by the Supreme Court.

– July 07, 2011 12:20 PM
Q.

"Validity"

What does that mean in this context? Naively, a debt can be valid even though the debtor is in default. Is the meaning of this amendment all that cut and dried?
A.
Gerard Magliocca :

A narrower interpretation of Section Four would be that a temporary suspension of debt payments that is made good to the bondholders does not question the validity of the debt. I don't think that's right, but I must admit that I'm not certain about that. 

– July 07, 2011 12:23 PM
Q.

Printing money

I asked the question titled "Spending appropriations without issuing debt," and perhaps I was unclear. Here is what I meant: Could the government continue to pay its obligations, consistent with Congressional appropriations, without issuing new debt exceeding the debt ceiling? In other words, simply "print money" to pay its bills.
A.
Gerard Magliocca :

You would have to get the Federal Reserve to agree, but, in theory, yes.

– July 07, 2011 12:24 PM
Q.

So, If Congress Defaults...

So, if Congress defaults, which if I am reading you correctly, that would be unlawful? Correct? In that case, can we arrest ALL of Congress, Republicans and Democrats? Maybe with the threat of arrest, they will stop playing silly partisan games which actually affect human lives and find ways to WORK with each other or is that just a silly dream? (Still, people's lives are not PlaySkool dolls, though Congress seems to think otherwise.)
A.
Gerard Magliocca :

Worse still, they could be voted out of office next year.

– July 07, 2011 12:25 PM
Q.

Debt vs Spending

I can see how the 14th Amendment could be used to prevent Congress from abrogating its debt payments, but there is enough income flowing into the Treasury to pay its current obligaitons. Even if there wasn't, the debt would still be valid and payable once enough fnds are available. The question then beocmes: Can the 14th Amendment be used to SPEND money that the government doesn't have on entitlement or discretionary items. I believe not. Congress may pass a law providing for entiltements or discretionary spending, but the funds must be authorized in a separate bill. If Congress doesn't authorize the spending, the Obama Administration cannot spend it. Isn't the "power of the purse" one of Congress' enumerated powers?
A.
Gerard Magliocca :

You're right.  Nothing gives the President the power to spend money on things other than bond obligations (interest and principal).  Lots of other government "promises" went unfulfilled during the 1995 shutdown, but nobody thought that was unconstitutional

– July 07, 2011 12:27 PM
Q.

Economic consequences

Is your specialty just the legality of our debt under the 14th Amendment? If not, I am wondering what your feelings are about the economic consequences should the debt limit not be raised?

A.
Gerard Magliocca :

Well, it will probably lead to some increase in interest rates, though it's hard to say how much.

– July 07, 2011 12:28 PM
Q.

What about Section 5?

Section 5 states that "The Congress shall have power to enforce, by appropriate legislation, the provisions of this article." Is there any legitimate argument that placing a limit on debt spending is not a "legitimate" exercise of Congressional powers?
A.
Gerard Magliocca :

It is so long as there is no default.  Somebody should try to figure out how long the Treasury could fund our debt by selling liquid assets (i.e., what does our balance sheet look like?).

– July 07, 2011 12:30 PM
Q.

Concern about the integrity of the body who would decide this issue

Is there any chance at all that the five intellectually dishonest right wing political activists on the "Court" would do other than back whatever position the Republicans take on this issue?
A.
Gerard Magliocca :

I don't accept your description of those Justices, but this will never come to the Court anyway.

– July 07, 2011 12:31 PM
Q.

14th Amendment

Is this a valid use of the 14th Amendment?
A.
Gerard Magliocca :

I think the better option would be for Congress to at least raise the debt ceiling to authorize the issuance of new debt to make payments on the existing debt.  A fire sale on national assets is a bad idea, though I'm sure the naming rights for Yosemite ("presented by Tostitos") would command big bucks.

– July 07, 2011 12:34 PM
Q.

Historical examples

Hasn't our country been in a debt ceiling crisis a few times in history. How does these historical instances compare to today?
A.
Gerard Magliocca :

Not like this.  The closest example was in the 1930s, when we devalued our debt by going off the gold standard.  The Supreme Court (in an opinion by only four Justices) said that this violated the Fourteenth Amendment, but they came up with a convoluted reason why the bondholders were entitled to nothing.  

– July 07, 2011 12:36 PM
Q.

Now, the Constitutional question

It seems to me that a literal interpretation of the 14th amendment could make the debt ceiling law unconstitutional on its face (depending on how it's written). However, in operation couldn't the debt ceiling still be in force on all spending other than debt service?
A.
Gerard Magliocca :

The last part of what you said is my view.  The debt ceiling is unconstitutional only if there is no other way to pay our debt. That's an important fact that the Treasury should assess.

– July 07, 2011 12:38 PM
Q.

Minnesota state government closure

Do you think that negative public opinion from the current (week-long, thus far) Minnesota state government closure will influence thinking to keep the Federal government going after August 2 by raising the Federal debt ceiling? After all, the 1995 Federal government shutdown turned out to bite the Republicans (especially then-Speaker of the House Newt Gingrich) on the backside.
A.
Gerard Magliocca :

I think that they will reach a deal before August 2nd. Otherwise, they'd miss their summer vacation.  I think that's actually a more powerful motivation that anything else.

– July 07, 2011 12:39 PM
Q.

Supreme Court

You say it would never come to the Supreme Court, why do you say that?
A.
Gerard Magliocca :

Because nobody would have standing to challenge a unilteral presidential action.  The only remedies are impeachment or voting him out next year.

– July 07, 2011 12:41 PM
Q.

Bondholder Suit if Default?

You mentioned earlier that the bondholders could sue the United States if there were a default. But what about the U.S.'s sovereign immunity?
A.
Gerard Magliocca :

Right you are!  The bondholders can be stripped of their right to sue by Congress.  At present, though, they probably still have that right.

– July 07, 2011 12:41 PM
Q.

Debt vs Spending

Isn't there a difference between debt versus spending that is being ignored here? Paying off bonds and bills for goods and service already rendered is certainly debt. But if Congress decides not to purchase anythng new it doesn't have money for, that doesn't constitute debt, does it?
A.
Gerard Magliocca :

That's right.  I know there is an argument that any authorized spending (not just bond payments) are covered by Section Four of the Fourteenth Amendment, but I think that's wrong.

– July 07, 2011 12:43 PM
Q.

No Pay

What would ultimately be the result if we just refused to pay our debt?
A.
Gerard Magliocca :

We've have to pay higher interest rates in the future.  That's why the Greeks are so desperate not to default.

– July 07, 2011 12:44 PM
Q.

What counts as debt in your argument?

I assume you mean to include the entitlements like Social Security, Medicare, etc? Does this include contracts entered for the year? If it is just debt service on the bonds, there is certainly enough in tax money to pay for that.
A.
Gerard Magliocca :

I don't think that there is enough actually, but if there is then there's no constitutional problem.

– July 07, 2011 12:45 PM
Q.

Public debt

How is it possible for Pres. Obama to consider issuing debt through 14th Amendment, when it's only "authorized by law," in the power of Congress and Article I, Sec. 8 of the Constitution?
A.
Gerard Magliocca :

Some people have wondered whether the President would have the authority to unilaterally raise taxes.  (After all, if you think he can issue debt as a last resort, why not raise taxes?) That doesn't seem right, though, does it?

– July 07, 2011 12:46 PM
Q.

Debt

On what legal grounds do the Republicans feel they can stop the President from enacting the 4th part of the 14th?

A.
Gerard Magliocca :

Probably none.  Members of Congress generally do not have standing in this sort of situation.  On the other hand, the force of public opinion might compel the President to stop.

– July 07, 2011 12:48 PM
Q.

You didn't answer the question.

"What in the laws makes one subordinate to the other?" One set of laws say spend the money. The other law says you can't spend the money. The laws are in opposition - why does the debt ceiling law rule rather than the laws authorizing spending?
A.
Gerard Magliocca :

Because the Treasury can meet the authorizations in other ways.  Plus, an authorization has no special constitutional status -- debt payments do.

– July 07, 2011 12:50 PM
Q.

SCOTUS

Exactly why wouldn't the Court be willing to step in?

A.
Gerard Magliocca :

Well, I guess the Bush v. Gore precedent is a warning that you can never say never.  But I doubt that the Justices would want to get involved in fundamental budget questions.

– July 07, 2011 12:51 PM
Q.

Follow on question on printing money...

Congress has the power to devalue money and set the foreign exchange rate : even if it has delegated these powers to the FED (I.8), for the executive to usurp them would be tantamount to a dissolution of the constitution and government under it... So I wouldn't think printing money was an option.

A.
Gerard Magliocca :

I don't think an Act of Congress prohibits the "printing money" solution though.

– July 07, 2011 12:52 PM
Q.

Gerard Magliocca :

Thanks for writing in.  Hopefully they will reach a budget deal and we won't need to face these difficult legal issues.

Q.

 

A.
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