Headlines need to be brief, so let’s rephrase: if Congress doesn’t raise the debt ceiling, President Obama has three options, each of which comes with a reasonable case that it’s unconstitutional. Obama can:
- Choose which bills to pay and which to default on;
- Pay all the bills, which means ignoring the debt ceiling, the “14th Amendment option”;
- Pay none of the bills, the “do nothing option”
Rick Ungar explained the constitutional issue with picking which bills to pay. In the case where it struck down the line-item veto, Clinton v. New York, the Supreme Court said the Constitution doesn’t allow the president to pick and choose items among congressional appropriations. He has to pay them all. That suggests if Obama does as he’s generally expected to do, pick some bills to pay while defaulting on others, he’s in violation of this ruling.
If Obama then decides to pay all the bills, he has to order the Treasury Department to ignore the debt ceiling, and could do so citing the 14th Amendment prohibiting the questioning of federal debt. The counter-argument is this would amount to usurping Congress’ power of the purse, since by refusing to raise the debt ceiling, they have not authorized paying bills that require more borrowing. That would mean paying only those bills for which there is cash enough to cover them, which violates the Supreme Court ruling in Clinton v. New York.
What if, deciding he’s violating the Constitution either way, Obama decides to do nothing? Pay no bills at all? That runs into the same problem as the 14th Amendment option, because Congress has authorized the spending, and he can’t decide on his own not to spend. So by doing nothing, he is usurping Congress’ power of the purse.
So if the objections to each action are constitutionally correct, Obama can’t pay all of the bills, can’t pay some of the bills, and can’t pay none of the bills.
In policy terms, one option is clearly best: pay all the bills, and blow away the debt ceiling. It’s like asking creditors to accept that borrowers can refuse to pay back debts because the borrowers would have to take on new debt to pay old debt, but that would violate the borrower’s self-imposed borrowing limit. Imagine trying that with other debts. “Sorry mortgage company or credit card company, I know I owe you money, and I can pay you by borrowing more elsewhere, but I don’t want to borrow any more money, so I’m not paying you. Hope you understand.” I somehow doubt they’ll understand, and are more likely to say it’s not their problem you have to take on new debt to pay old debt, and would you like to talk to the nice people at collections. Then scale it up and realize that while your screwiness screws up only your own credit, for the federal government to do the same thing would be disastrous for everyone.
Congress used to default on its debts as much as it paid them, during the Revolution, when the Articles of Confederation gave Congress no taxing authority and left it begging the states to voluntarily send money. The framers of the Constitution thought, by creating a strong central government, including taxing authority, they had solved the problem of making good on the nation’s debts. Little did they know how the name “tea party” would be perverted.