The Constitutional Case for Disarming the Debt Ceiling

For all of Donald Trump’s recent blathering demands to “terminate the Constitution,” it turns out that he might get his wish—just not the way he wanted it. A rushed lame duck session has come and gone, during which time Congress failed to find the resolve either to raise or abolish the debt ceiling. Now responsibility for its stewardship passes into the hands of the House GOP, which is already mired in chaos as it tries to choose a speaker of the House to lead it. If McCarthy’s woes are a sign of things to come, it may be that a dramatic termination could come about in the form of a debt ceiling breach.

While the new House GOP majority prepares for its Götterdämmerung, it might be time to raise our voices to speak a good word for original intent—for nothing could be more unconstitutional under the original 1787 Constitution than for Congress to use its powers to willfully default on the debt. Right now, in the name of original intent, the Biden administration should be in a friendly federal court seeking a declaratory judgment that the Debt Limit Statute cannot limit the obligation of the United States to continue borrowing to prevent a gratuitous default on its debt.

There is always the chance that the Biden administration will not prevail in the courts—but that doesn’t mean it can’t win. And win or lose, there is merit to be had in mounting a powerful case against debt ceiling brinkmanship, both under the original 1787 Constitution and under the Civil War Amendments. Besides, if it is not declared unconstitutional by a federal judge, those paychecks that federal judges currently enjoy may stop flowing into their bank accounts.

Let’s start not in the usual place: Section 4 of the Fourteenth Amendment, adopted in 1868, which refers to the validity of the public debt. Instead, let us start with Article I, Section 8: “The Congress shall have Power to Lay and Collect Taxes, Duties, Imposts, to pay the Debts and provide for the Common Defence and General Welfare of the United States; To borrow money on the credit of the United States.” (Emphasis added.)

For the Framers, the payment of the debt was an important factor in providing for the “Common Defence and General Welfare.” In Federalist Number 30, Hamilton explains that the power to tax and borrow is conferred on the new government only for the purpose of preventing a default or ensuring the payment of the debt. Article I is not open-ended but a grant of limited powers for specific purposes. If Hamilton is right, then it is a mistake to argue—as some legal scholars have—that the power to “borrow money on the credit of the United States” includes the “lesser” power of not paying the debt and willfully ruining the credit.

As with the power to tax, Congress has the power to borrow, only on the condition of its use to prevent a default. The power to tax and borrow conferred only to prevent a default cannot logically include a “lesser” power to then actively engineer a default. It would nullify the very purpose of Congress’s borrowing powers. As Hamilton argued in Federalist Number 30, “Who would lend to a government that would preface its overture for borrowing by an act which demonstrated that no reliance could be placed on the steadiness of its measure for paying for it?”

As Hamilton further explains here, the power to borrow of the new government is based on the power to tax, and both are in the service of guaranteeing that the debts of the new government would be paid. Even if taxation came up short, “whatever deficiencies there may be can with confidence be supplied with loans.” Hamilton writes: “Foreigners, as well as citizens of America, could then reasonably repose confidence in its engagements.” Because the new government had the power to tax, there would be no limit on its power to borrow.

Were Congress to use its power to willfully trigger a debt ceiling default, it would be no ordinary constitutional violation. It would be a repudiation of the Constitution in a much more fundamental way, a betrayal of the very purpose of leaving the Articles of Confederation—which did not grant borrowing powers to Congress—behind; that is to say, it rebukes the very thing that gives our Constitution its legitimacy. From the perspective of Hamilton in Federalist 30, it would be tantamount to terminating the Constitution itself.

There are, of course, the opposing views of Charles Beard and others, who hold that the Framers were simply a clutch of creditors who just wanted to be sure their bonds were paid. But as other historians note, some of the Framers were deep in debt. The country desperately needed foreign capital—as Hamilton said, it was crucial to attract that capital from “foreigners, as well as citizens of America.”

But business concerns were not the Framers’ only guide star: Hamilton stresses the need to prevent a default to engage in war. And though Hamilton does not name the British, or claim an existing war that needed to be provided for, there was, at the time, a sort of ongoing shadow war: The British were still trying to get back at upstart America. And so, to Hamilton’s mind, a default on the debt would be a mortal wound to the Republic. To destroy the public credit, he wrote in Federalist Number 30, would be an existential threat to the country. Suppose a real war had broken out. As Hamilton writes in Federalist Number 30, “To imagine at such a crisis credit could be dispensed with would be the extreme of infatuation.” 

A Congress that willfully defaulted on its debt, Hamilton argued, would expose the country to destruction. But on the off chance that Hamilton’s word is not enough, the Framers added, in Article I, Section 10, a prohibition against the states attempting to willfully default on debts by prohibiting changes “in the obligations of contracts.”

But that’s the original intent of the 1787 Constitution, as set out by its principal soothsayers, Hamilton, Madison, and Jay: Congress has the power to borrow in Article I only on condition of avoiding a default, not for enacting one. Now let’s turn to the restatement of the original intent of the “1867 Constitution,” as modified by the three Civil War amendments, the Thirteenth, the Fourteenth and the Fifteenth. Under these ratified amendments, the argument for the Debt Limit Statute becomes a form of treason. 

Section 4 of the Fourteenth Amendment says, in part: “The validity of the public debt of the United States, authorized by law, including debts incurred for the payment of pensions and bounties for service in suppressing insurrection or rebellion, shall not be questioned.” (Emphasis added.) In both the Clinton and Obama administrations, legal scholars such as Lawrence Tribe argued that Section 4, so oddly worded, did not directly limit the power of Congress; it does not say a willful default would be unconstitutional. Professor Tribe said that Section 4 was not enough. Obama was not sure. Clinton said he did not care, he would keep paying anyway. 

But this argument over Section 4 misses the point: Its purpose was not to newly assert that a willful destruction of the public credit was unconstitutional. It was already unconstitutional, under the 1787 Constitution, as explained by Hamilton in Federalist Number 30. The purpose of Section 4 was to amend the Speech and Debate Clause of Article I, in a ham-fisted way, to prevent returning members of Congress from the Confederacy even to question the debt limit. For that purpose, Section 4 has been a bust. It is too clumsy, an act of an occupying power wary of the enemy. It is not self-executing, and Congress has never used its authority under Section 5 to punish such a form of treason. That is hardly surprising, since members of Congress cherish their immunity under the Speech and Debate Clause, not to mention the First Amendment.

But Section 4 is not meaningless: It confirms the original intent, and it reaffirms the understanding that from 1787 on, “We the People” have conferred the power to tax and borrow only to avoid a default on the debt. What Section 4 adds is a warning that Congress at least has the power to enact a criminal law—making advocacy of a debt ceiling breach a form of treason.

So if the Federalist Papers lack force in divining original intent, even as we treat it with reverence, Section 4 affirms that a limit on the power to cause a default is already in the Constitution. As Justice Jackson has reminded everyone, there is an original intent of the Fourteenth Amendment that deserves at least the same respect that we give to Hamilton and Madison in the Federalist Papers.

Under Obama, who like Clinton taught constitutional law at one point early in his career, the sentiment seemed to be that a legal challenge to the debt ceiling, even if plausible, could founder. That was a going concern even back in 2011, when the judicial right still had only shaky control of the Supreme Court—as Justice Anthony Kennedy was so notoriously difficult to pin down on big constitutional questions. Of course, the right has strengthened its grip on the levers of judicial power since then, and has devoted itself to transforming the courts into an ideological body with a distinct political agenda. So what would be the point of bringing a legal challenge against the debt ceiling as things currently stand?

The short answer: Even with the current Supreme Court, this strategy may prove to be more effective than it seems at first blush. First of all, at least some federal courts in some of the judicial circuits would find the case to be “justiciable,” in the legal jargon. There are tens, if not hundreds, of millions of people who have the concrete injury necessary for standing to sue to challenge the Debt Limit Statute. It is sometimes assumed that only a bondholder could launch such a suit and that a bondholder has no standing, because the United States could hold up other payments to pay off its bonds. But the only thing Article III requires for standing to challenge invasions of constitutional rights is a concrete injury. The elderly, especially the poorest widows, may need those small Social Security checks in order to survive; countless people might perish if hospitals hold off health or nursing care for which they may never be paid.  

Suppose one such plaintiff were to sue and win a declaratory judgment, or even a preliminary injunction, from a district court. Would this case move on to the Supreme Court? Only if the Biden administration were to appeal the decision. It could, alternatively, accept the decision, and let the legal controversy end.

Could a member of Congress, like Jim Jordan, appeal such a decision? As it happens, the law is abundantly clear that members of Congress have no standing either as a plaintiff or as a defendant to sue to vindicate the interest of Congress in enforcing a law. For at least 20 or more years, federal courts have washed out these claims by members of Congress on standing grounds.

This point is set out by the Supreme Court in Byrd v. Raines, a 1997 case brought by the late Senator Robert Byrd, whose protégé was Senator Manchin. Byrd was an inveterate advocate of the institutional power of Congress. On behalf of Congress, in his official capacity, and not because of any injury to him, Byrd, along with others, challenged the Line Item Veto Act. That law allowed the president to cancel spending and tax measures in a bill even after the president signed it into law. The court held that individual members of Congress had no standing to challenge an injury to Congress as an institution: Rather, it was up to Congress to take away the president’s authority expressly. Here too, if Congress did not like the amount of debt that Congress had incurred, there is a simple institutional remedy—pass a law, admittedly over the president’s veto, to slash Social Security or anything else it likes. After all, Congress can shut down the funding of the federal government. What it cannot do is to challenge the validity of the public debt.

The question arises: To what extent does the Biden administration, or the Democrats in Congress, really want to stop the GOP from engineering a default? Give some rope to the GOP to hang the Constitution, and it may end up hanging the GOP instead. Let the public see that the House Republican caucus is ready to destroy the public credit in order to slash Social Security and Medicare, which could be the price it demands from Biden. Republicans’ intransigence would leave them on the hook for all the chaos in the financial markets that a debt ceiling breach would unleash. On that issue alone, the Democrats might bring about the destruction of the GOP. It may seem appealing to let the House ruin the public debt if it destroys the GOP.

But the cost is too high. Debt has been the country’s greatest asset, as Hamilton knew it would be. Debt let us grow. Debt let us win World Wars I and II. In this century, debt saved us from the financial crisis. Debt let us survive Covid. A fine recent book, In Defense of Public Debt, by four distinguished economists, explains how much we owe to debt. We have an obligation to save it for crises ahead and use every means, legal or political, that may help to do so. It is typical of the GOP to treat the country’s debts as dishonorably as Trump treats his own. Default is his business model. The Framers would be horrified if we made it the country’s model too.