But is Carney right? A growing number of top Democrats strongly disagree and think the 14th amendment option is a good last resort. “Is there anything that prohibits him from doing that?” Iowa Senator Tom Harkin told The Hill today. “The answer is no.” Thursday, House Minority Whip Steny Hoyer described it as the least bad option if Congress doesn’t act. Former President Bill Clinton’s on board, too. And a growing number of law professors and legal scholars are now arguing that Obama would actually prevail.
Yale’s Jack Balkin explains how this would work. At some point after Aug. 2, Obama would face the demands of multiple contradicting laws. By law, the government is supposed to pay out money that’s already been appropriated. But the Treasury’s obligations would exceed revenues, and, under debt-ceiling law, the government’s not allowed to print new currency or float new debt.
So, Balkin notes, Obama “has a constitutional duty to treat at least one of the laws as unconstitutional as applied to the current circumstances.” And, lo, Section 4 of the 14th amendment does say, “The validity of the public debt of the United States, authorized by law, … shall not be questioned.”
If Obama decided to treat the debt ceiling as unconstitutional and start floating new debt anyway, it’s not clear anyone could stop him. As Jeffrey Rosen writes in The New Republic today, individual members of Congress wouldn’t have standing to stop him—Congress would need to pass a joint resolution, which is unlikely given that Democrats control the Senate. It’s also unlikely that individual taxpayers or bondholders would have standing. “The most likely outcome is that the Supreme Court would refuse to hear the case,” Rosen argues. And if a case did somehow make it through, Rosen notes, even the conservative justices would likely rule in his favor—at least if they were consistent with their judicial philosophies. (Okay, so that’s not an ironclad assumption.)
Are there dissenters? Sure. Obama’s former law professor at Harvard, Laurence Tribe, has claimed that using the 14th amendment this way would lead to absurdity: “It would mean that any budget deficit, tax cut or spending increase could be attacked on constitutional grounds, because each of those actions slightly increases the probability of default.” But for a rebuttal, see NYU’s Ronald Dworkin, who argues that the principle behind the clause was squarely aimed at politicians taking “action that they know would make default inevitable.” The latter, Dworkin notes, is what we’re facing right now—not a bump in the probability of default, but certainty.
The biggest problem, however, is the practical one: How markets would react to the 14th amendment option. I put this question to Tom Gallagher, a fiscal and monetary policy specialist at the Scowcroft Group. “[O]n the one hand it shows that the feared disruptions from no debt ceiling increase wouldn't happen,” Gallagher writes via e-mail. “ On the other hand it plunges the U.S. into a genuine constitutional crisis. How quickly would courts rule? Who would bring suit? Would the House initiate impeachment proceedings? That's hardly a reassuring set of questions. And then there's the question of who would buy debt that might later be ruled to have been unconstitutionally issued.” Worse still, Gallagher notes, foreign investors might get jittery: “The Chinese might decide to sit out those auctions for appearance purposes alone.”
Nor is it clear that invoking the Constitution would calm the credit-rating agencies. Standard & Poor’s has declared that they will downgrade the nation’s credit rating within the next three months “if we conclude that Congress and the Administration have not achieved a credible solution to the rising U.S. government debt burden and are not likely to achieve one in the foreseeable future.” The Constitution might allow Obama to raise the debt ceiling, but a move that radical and that unilateral is a firm admission that Congress and the White House are not likely to agree on a significant deficit-reduction package anytime soon.
That’s not exactly a reassuring future to contemplate. Then again, blowing past the Aug. 2 deadline without a plan isn’t terribly reassuring, either.