Posts Tagged ‘national debt’

Fourteenth Amendment Re-Redux

Sunday, 13 January 2013

Perhaps I'm a Constitutional hipster, in-so-far as I was talking about section 4 of the Fourteenth Amendment before it was cool to do so. After it had become cool, I felt moved to explain

[The Fourteenth Amendment] is indeed [the law that empowers the President to increase the ceiling] — where the only way not otherwise in violation of the Constitution to pay debt that has come due is to borrow beyond the existing limit. If the debt can be paid in some other way, then no special authority can be found for the President in section 4.

[…] The President doesn't get to say that he or she must raise the limit to continue funding institutions to which he or she can apply profound and moving terms, unless those institutions are indeed Constitutionally mandated.

With talk of the President raising the borrowing limit by decree again heating-up, I feel moved to labor aspects of what I'd earlier explained.

As debt comes due, for which sufficient funding has not been allocated, the Federal government can do one or more of five things:

  • Default.
  • Increase tax collections.
  • Decrease other expenditures to allocate more revenue for debt service.
  • Liquidate assets.
  • Engage in new borrowing to service the debts from previous borrowing.
Advocates of the President raising the ceiling by decree want to pretend that the Constitutional prohibition of the first of these five options empowers the President to effect the last of these options by decree. But there would be three other options; it is appropriate to ask why the President wouldn't instead be required to choose one or more of the other three.

And, if a decision must be made amongst some or all of the four options not prohibitted by section 4 of the Fourteenth Amendment, it is not evident that it is the President's decision to make, even if the Congress will not. In the absence of Constitutional guidance, there is no apparent reason that abdicated legislative responsibility should go to the executive branch as opposed to the judicial branch.

Fourteenth Amendment Redux

Saturday, 9 July 2011

Back in May of 2010, I posted an entry about the Fourteenth Amendment to the US Constitution and the national debt. I'm not sure that readers found that entry particularly interesting at the time, but it gets an ever-increasing number of hits, as the United States approaches default, and as parts of the political left have begun drawing attention to the Amendment. More specifically, parts of the political left have claimed that the Amendment actively requires Congress to increase the debt ceiling, and other parts have claimed that the Amendment empowers the President to increase the debt limit without consent of Congress. It's that latter claim that I will now examine.

Let's return to the actual language of section 4:

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. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

(Underscores mine.) Now, an important phrase here is authorized by law; the question is of how a debt as such comes to be authorized by law.

The Constitution itself is law, superior to any-and-all further legislation. It is the Constitution that creätes the Presidency. Before and after the Fourteenth Amendment, the Constitution does not invest any law-making authority in the Presidency beyond what can be said to exist in ability to negotiate treaties with foreign powers (and these treaties must be ratified by a two-thirds majority of the Senate), and Congress has not delegated to the Presidency the authority to increase the debt ceiling.

So the question truly is of whether and when the Fourteenth Amendment might, as parts of the political left claim, be itself exactly the law that empowers the President to increase the ceiling. And the answer is that it is indeed that law — where the only way not otherwise in violation of the Constitution to pay debt that has come due is to borrow beyond the existing limit. If the debt can be paid in some other way, then no special authority can be found for the President in section 4.

And there is the rub. The President doesn't get to say that he or she must raise the limit to continue funding institutions to which he or she can apply profound and moving terms, unless those institutions are indeed Constitutionally mandated. The political left will find none of its distinguishing programmes amongst these institutions. (And, should they bother to read what's actually there, the political right would find that many things that it regards as essential are not actually required by the Constitution.)

The US Constitution and the National Debt

Monday, 10 May 2010

The Confederate States of America went into debt to finance their war of secession. After the war some of their creditors wanted that debt repaid. The United States, on the other hand didn't want them to recover any of their investment, for the obvious reasons. In response to the insistence that this debt not be paid, sympathizers of the Confederacy suggested that, likewise, the debt of the Union should not be paid, for the obvious reasons. Additionally, it was argued that the emancipation of slaves was a taking of private property, so that, under the Fifth Amendment, former slave-owners were owed just compensation.

The North reminded the South who was making the rules, and included the following as section 4 of the Fourteenth Amendment:

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. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.
(Underscores mine.)

There's probably someone out there somewhere, even now, insisting that the debts of the Confederacy should be repaid, or that descendants of slave-holders are owed reparations, but those issues no longer have much currency, nor can they be expected to recover currency.

On the other hand, when addressing the debts of the United States, that Amendment included but did not limit itself to those debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion. What remain potentially relevant, then, are the underscored words:

The validity of the public debt of the United States, authorized by law, […] shall not be questioned.
The national debts of the United States cannot Constitutionally be repudiated, without further Amendment. Under the Constitution, they have to be serviced; and, when they come due, they have to be paid.

Present levels of deficit spending are widely seen as unsustainable, and the United States Treasury has begun to pay discernible risk premia, which is to say that a significant part of the market expects that the United States might default. So one question is of how a default might be effected.

In theory, an Amendment could quickly be ratified to permit default, though a significant share of the national debt remains domestically held, which would tend to brake the passage of such an Amendment. Of course, the beginning of the process of amendment would drastically erode confidence in the debt, so that the risk premia would grow dramatically, and the Treasury might find itself almost immediately unable to pay bills, and might remain unable to do so until the Amendment were ratified and restructuring negotiations were completed.

A more likely process would be a Declaration of Emergency, under which the Constitution were suspended, as the federal state worked-out what it could expropriate from whom. (The Constitution makes absolutely no provisions for such emergency suspensions, but we've had a long history of our rulers claiming the power to effect them,[1] and of courts doing little to check such actions.) Again, the United States might be unable to borrow money, but the process of partial repudiation could immediately be brought forward.

Or it might be that the debt were restructured without the consent of creditors. Such a restructuring would, in fact, be a partial repudiation, but lawyers and judges have long proved adept at making distinctions where there are no differences.


[1] With one exception, during each war since the adoption of the Constitution, the President has suspended provisions of the Constitution. That one exception was Madison, who had been the principal author both of the Constitution and of the Bill of Rights.