Thursday, July 7, 2011
Law and the so-called Debt Ceiling II
Congress holds the power to limit Treasury Secretary Timothy Geithner's ability to issue more debt, and he only has a small amount left before he hits the debt ceiling. Under the Constitution, Article I, section 8, only Congress has the power to "To borrow Money on the credit of the United States." Congress has exercised this power to authorize borrowing up to $14, 294,000,000.00.
At the same time, as noted in my prior blog entry, obligations of the United States cannot even be "questioned" under the 14th Amendment, meaning that if Congress allows a default it has breached the Constitution. But, if the Treasury continues to issue debt in defiance of Article I, section 8, it would act outside of its authority under the Constitution. Thus, this debt crisis, if permitted to fester, will lead to a Constitutional crisis of the first order.
Some suggest that because of the 14th Amendment the Administration may ignore the debt limit. But these commentators fail to address Article I, section 8. Therefore I find their position ill-founded, at least in part, and at least as articulated, here, here, and here. However, Jack Balkin has a thorough post on this issue, here.
Balkin argues correctly that the debt limit ceiling is constitutional. Nevertheless, due to the 14th Amendment, he argues that the Obama Administration must exhaust all possible options to avoid default.
I argue that if Congress fails to raise the debt limit it breaches the Constitution and puts the President in a no-win situation: he either breaches the Constitution by ignoring the debt limit; or he breaches the Constitution by defaulting on debt under the 14th Amendment or failing to execute laws (appropriations) that are validly enacted by Congress. It is at this point that the Treasury must print money as argued by economist Peter Morici and myself in my prior post.