Is the Debt Limit Constitutional? Biden Aides Are Debating It.

[Nevilledog]

https://www.nytimes.com/2023/05/02/us/politics/debt-limit-us-constitution.html

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https://archive.is/HdQ5o

A standoff between House Republicans and President Biden over raising the nation’s borrowing limit has administration officials debating what to do if the government runs out of cash to pay its bills, including one option that previous administrations had deemed unthinkable.

That option is effectively a constitutional challenge to the debt limit. Under the theory, the government would be required by the 14th Amendment to continue issuing new debt to pay bondholders, Social Security recipients, government employees and others, even if Congress fails to lift the limit before the so-called X-date.

That theory rests on the 14th Amendment clause stating 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.”

Some legal scholars contend that language overrides the statutory borrowing limit, which currently caps federal debt at $31.4 trillion and requires congressional approval to raise or lift.

Top economic and legal officials at the White House, the Treasury Department and the Justice Department have made that theory a subject of intense and unresolved debate in recent months, according to several people familiar with the discussions.

*snip*

[LetMyPeopleVote]

1. I personally lein to the theory that the 14th Amendment controls

I do not think that debt limits make sense and believe that the 14th Amendment should control

[Nevilledog]

2. I agree

[anciano]

9. Agreed .....

but I wouldn't bet more than a dollar on what the current SCOTUS would say .....

[Bayard]

3. Sounds pretty cut and dried to me

But I am wondering why the Obama admin decided not to go that route.

[Beautiful Disaster]

11. Because it doesn't guarantee anything.

It still is ambiguous enough that financial institution participating in a treasury auction are not going to feel good buying those treasury bonds. The US debt would be entangled in a constitutional crisis, and investors would be at the mercy of this SCOTUS which already has an infamous track record as activists who just make it up as they go along.

No one is going to have any confidence buying those bonds. It would wreck financial markets just the same. Investors would treat it just like a default, in part because the SCOTUS could cause a default at any moment.

None of these alternative solutions actually solve the problem, which is uncertainty. Investors need certainty. That's why US Treasuries are the backbone of the global financial system. When you take that certainty away, the damage is all the same.

And that's the problem. We're trying to avoid an economic meltdown.

If a deal isn't reached, the US is likely to do just that - ignore it on the grounds of the 14th Amendment. But it's not going to be a good solution. It's going to likely plunge the US into a recession.

Hell, back in 2011, the uncertainty of not lifting the debt ceiling forced the US to have its rating downgraded and slowed growth. The stock market also lost its largest percentage since the tail-end of the Great Recession in 2009.

Obama didn't do it because he was able to reach a fairly equitable deal at the time that likely saved a recession and his reelection.

A deal to lift the ceiling is always the most preferred outcome because it's the one with the least amount of uncertainty. If you don't raise it, the economy is going to get slammed regardless if it's technically considered unconstitutional.

[Buckeyeblue]

14. And there is the pressure on Republicans to not let the US default

That's why there will be a deal That's easy to swallow. Most of this is McCarthy demonstrating to the crazies that he is fulfilling his obligation to them.

Push comes to shove, Biden will take the constitutional high road. What this SCOTUS does when Congress sues is unpredictable.

[dchill]

4. I think they're on to something.

[bucolic_frolic]

5. That is unambiguously clear, it doesn't mention the federal budget, it concerns debt.

Debt is cumulative. Budgets are annual. How did we never look at this before. Seems like we're dusting off the Constitution after not reading it for 150 years.

[Ocelot II]

6. If the Constitution says the government has to pay its bills, why was there ever

a statutory debt limit in the first place?

[TdeV]

7. 14th Amendment. Go right ahead paying our bills.

[crud]

8. just keep paying the bills

point to the 14th and dare McCarthy to sue him.

[GenXer47]

10. yeah let them crash the airplane

If fascist pukes want to commit political suicide, here's the rope!

[bucolic_frolic]

12. I wonder though if debt payments are inviolable

The GOP when holding majorities and the presidency, could hollow out the US financially with tax cuts for the wealthy and make taxpayers pay for it or just force deficit spending to debase the US dollar.

[LetMyPeopleVote]

13. The 14th Amendment allows the President to take lawful actions to prevent default on our debt

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