Plan B for raising debt ceiling: Obama should invoke the Constitution
President Obama wisely wants to resolve the looming crises with the debt ceiling and the 'fiscal cliff ' now. If he can't strike a debt-ceiling deal, he has another option: Bring out the Constitution, whose 14th Amendment states that the 'validity' of US debt 'shall not be questioned.'
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In a 1935 case (Perry v. US) the Supreme Court determined that Congress does not have the authority to renege on its obligations to its lenders. The president, then, could declare as unconstitutional the current debt-ceiling law – which requires congressional approval to raise the limit – or at least use such a threat as leverage.Skip to next paragraph
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The law goes back to the amended Second Liberty Bond Act of 1917. Its intent was to facilitate the financing of WWI through the issuance of long-term bonds. Until last year, when it became a political issue, Congress routinely raised the statutory debt limit as needed – always with bipartisan support.
What is different now is the willingness of House conservatives to use the debt ceiling as an instrument to force spending cuts by threats of government shutdown and credit downgrades if their demands are not met. Such political gamesmanship is beyond the intent of the law. It poses a current and serious danger to our democracy.
It is one thing to put a legal limit on spending or to try to control spending through talks such as the fiscal-cliff negotiations. But it is quite another to establish a retroactive process for refusing to pay debts already owed. Such a process was relatively harmless when both parties treated debt-ceiling increases as simply necessary when the limits were approached. Not so in today’s acerbic climate of congressional gridlock and winner-take-all mentality.
It is the well honored tradition that the US government pays its debts. Why else are so many nations around the world continuing to buy America’s bonds, even at historically low interest rates? The security of lending to the US government is what motivates both public and private investors. It is not in the national interest to put that tradition and US credibility to the test.
If President Obama should fail to solve the debt-ceiling limit as part of the fiscal-cliff talks, he has another means of leverage: the Constitution. He should use it.
L. Michael Hager is a co-founder and former director general of the International Development Law Organization in Rome.