As the Hill reports, business leaders don't just want a deal on the fiscal cliff, they want Congress to extend the debt ceiling and prevent a repeat of last summer's stand-off:
The Treasury Department says the government will reach its $16.4 trillion borrowing limit by the end of the year. But “extraordinary measures” could delay the need for a new, higher limit until early 2013.
Businesses and Wall Street want Washington to fix the issue well before that. Specifically, they want Congress to agree on a lame-duck package that avoids the automatic spending cuts and tax hikes dubbed the "fiscal cliff" and provides a framework for a broader deficit reduction deal next year. At the same time they want to prevent 11th-hour brinksmanship of the sort that triggered a U.S. credit downgrade in the summer of 2011.
There's good reason for wanting to avoid another debt ceiling fight — the first one was a large and destructive shock to the economy. It sent economic confidence into free fall and slowed employment growth; nonfarm payrolls decelerated to an average of 88,000 a month during the three months of the impasse, compared with an average of over 175,000 in the three months prior. The recovery is stronger now than it was in 2011, but it's still fragile, and a second debt ceiling fight could prove devastating.
At the same time, it would be unwise for President Obama to agree on a lame-duck package; he'll have the most leverage after Jan. 1, when the United States begins to descend the fiscal slope and tax rates return to their Clinton-era levels. By simply waiting, and ignoring the call of everyone else, the administration could win its ideal outcome, or something close to it.
As for the debt ceiling, last year, while Obama was haggling with House Speaker John Boehner over a "grand bargain," liberal commentators — along with top Democrats in the House and Senate — began pushing for the "14th Amendment" option to end the debt ceiling. After all, it's an anachronism — there's no sense in requiring Congress to authorize payments on debt the United States already owes.
A provision in the amendment — originally meant to ensure payment of Union debts after the Civil War — has implications beyond its original circumstances. "The validity of the public debt of the United States, authorized by law, including debts incurred for payments of pensions and bounties for services in suppressing insurrection or rebellion," the crucial passage says, "shall not be questioned."
Some legal scholars believe that — in the event of another stand-off — this could be used to declare the debt ceiling unconstitutional and remove the threat of fiscal hostage-taking. Others say that there's real political and legal risk in taking that step; last year, the Boston Globe quoted former White House adviser Lawrence Tribe as opposed to the idea. "We shouldn’t fool ourselves into thinking the 14th Amendment gives him this authority," he said.
It's a tough situation, but given the potential for real damage to the economy — as well as the political implications of leaving the debt ceiling on the table as a weapon for whoever wants to take it — it might be a good idea for Obama to test the constitutional waters and invoke the 14th Amendment. Not only would he strengthen his negotiating position, but he would — at least for the medium term — end an unnecessary practice that opens the United States to terrible economic harm.