The Volokh Conspiracy

The NYT “Room for Debate” feature focuses on how the President should respond if Congress fails to increase the debt ceiling. Among the contributors is Harvard’s Laurence Tribe. After explaining why the President cannot unilaterally disregard the debt ceiling (expanding on arguments he made in 2011), Tribe considers the alternative:

A second approach calls for the Treasury to “prioritize” the payment of bondholders when allocating incoming tax revenues. But prioritization comes at a cost: the very reason we need to borrow is that incoming revenues don’t cover all our spending. So prioritization requires skipping other payments mandated by law — perhaps payments on Social Security, Medicare and defense.

From a constitutional perspective, this approach is preferable to outright default, because it would ensure that the 14th Amendment’s basic promise is kept. It is likewise constitutionally preferable to unilaterally ignoring the debt ceiling, because it does not entail the presidential usurpation of a power specifically committed to the legislative branch. Apart from the technically legal but wildly unrealistic device of minting a trillion-dollar platinum coin, prioritization is the approach that does the least violence to the Constitution.

Tribe thinks this approach is inadequate, but is the least bad — and least constitutionally problematic — alternative. On this point I think Tribe is definitely correct. The alternative argument, made by Neil Buchanan, that it is simpler and less constitutionally suspect to simply issue more debt is unpersuasive. First, such a move involves the affirmative usurpation of a power reserved to the legislature — and such usurpation is more problematic than the refusal to execute a legislative command, such as by refusing to spend appropriated funds. Second, authorizing debt without clear constitutional authority to do so raises the prospect of the precise evil Section 4 of the 14th Amendment was intended to prevent: casting doubt on the debts of the United States.

As Tribe notes, it would be better were the debt ceiling not an issue at all. As he concludes: “we cannot find solutions to all of society’s problems in the Constitution.” Sometimes political leaders actually have to make politically difficult decisions.

Paul Krugman and Larry Tribe may think minting a platinum coin to evade the debt ceiling is legal, but the Department of the Treasury thinks otherwise, according to this report from Ezra Klein. According to

The Treasury Department will not mint a trillion-dollar platinum coin to get around the debt ceiling. If they did, the Federal Reserve would not accept it.

That’s the bottom line of the statement that Anthony Coley, a spokesman for the Treasury Department, gave me today. “Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit,” he said.

The inclusion of the Federal Reserve is significant. For the platinum coin idea to work, the Federal Reserve would have to treat it as a legal way for the Treasury Department to create currency. If they don’t believe it’s legal and would not credit the Treasury Department’s deposit, the platinum coin would be worthless.

In other words, Treasury believes the coin gimmick would be both illegal and improper, according to its spokesman. That would seem to settle the matter. Tom Maguire has more.

It is both significant and commendable that the Obama Administration has ruled out gimmicks (the coin) or unprecedented assertions of executive power (unilaterally rejecting the debt limit). This does not mean the President is without options, however. Should Congress fail to increase the debt ceiling, the President will still be obligated under the 14th Amendment to pay the federal government’s debt obligations, so long as revenues exceed such obligations. Insofar as there are insufficient revenues to satisfy other obligations — i.e. to pay for all the other things that Congress has authorized — the President will have to set priorities. As Michael McConnell explained last summer:

If we reach the debt limit, the Treasury will be compelled to reduce spending (other than payments on the public debt and pensions) to bring current expenditures in line with current receipts, just as a family has to do when it has maxed out on its credit cards. Presumably, the executive branch will have to make the tough decisions about priorities. No law exists to guide the process. In theory, essential services and payments will keep flowing, and less essential services and payments will be postponed. In practice, if history is any guide, politicians in the executive branch will find it more in their interest to shutter the most conspicuous and painful services first – this is called “closing the Washington Monument” – to maximize public pressure to increase the limit. It would be a crying shame if the executive stopped funding truly inessential services and programs, and no one (other than the immediate beneficiaries) noticed.

A wise and prudent President could use the occasion of hitting the debt ceiling to trim waste and excessive spending from the budget. This would not solve our long-term fiscal problem (that will require structural reform in entitlement programs coupled with measures to increase economic growth), but it would signal to the bond markets that we are serious about grappling with the spending mess. Waste and abuse are like the weather. Everybody talks about it, but nobody does anything about it. Indeed, in ordinary times the Impoundment Control Act (an unfortunate piece of legislation passed in response to Nixonian abuses) requires the executive to expend all appropriated funds, and thus prohibits the executive from postponing or cancelling non-essential spending, however wasteful. But the debt limit takes precedence over the Impoundment Control Act, especially in light of the Fourteenth Amendment’s prohibition of “questioning” the validity of the debt, which means the President can trim spending to the extent that appropriations exceed revenues. A President serious about controlling spending would find this an opportunity for leadership.

Thus, the real effect of Section Four of the Fourteenth Amendment is almost the opposite of what hopeful voices in Washington are saying. Section Four puts the onus on the President to reduce spending in order to avoid default on the debt. It does not permit him to borrow more.

UPDATE: Buzzfeed reports the Federal Reserve killed the coin idea.

Meanwhile, the Senate leadership urged the Administration to act unilaterally if necessary. (Letter here.) As noted above, unilateral action need not mean resort to the coin ploy or asserting authority under the 14th Amendment to issue new debt. And, in confirmation of Kerr’s law, Byron York reports all four signatories of the letter voted against increasing the debt ceiling in 2006.

TPM has an interesting post on the origins of the idea to use a commemorative platinum coin to evade the debt limit.

UPDATE: Apparently there’s even more to the story.

The idea of creating a $1 trillion platinum coin to evade the debt ceiling may be unwise — even “idiotic” — but is it legal? Proponents of the idea point to the following language in the U.S. Code:

The Secretary may mint and issue bullion and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.

This statutory text plainly authorizes the treasury Secretary to have platinum coins issued in any amount or denomination he wishes so that settles the matter, right? Not really, because it’s not clear this is what the statute means. Does it authorize the Secretary to issue actual currency? Or merely to issue commemorative coins to be sold and marketed to collectors? Either is a plausible reading of the text.

The plain text of a statute is and should be controlling, but what does the statute mean? To answer this question it is best not to look at a single provision in isolation. The meaning of a given statutory provision is often best understood in context and looking at the statute as a whole. Consider a statute providing that “Teachers shall not bear arms on school grounds.” Would such a statute prohibit gun possession? Sleeveless shirts? Displays of armorial bearings? The text of the statute could mean any of these things, so we look to the statute as a whole. If it were titled the “Gun-Free School Zones Act” and otherwise concerned gun-related issues, this would indicate one meaning of the text, whereas if it were titled “Teacher Modesty Act,” the “Uniform Uniform Code,” [the "Armorial Bearings in Education Act" or a "Code of Heraldry"], we would recognize that the statute is really about something else.

Back to the platinum coin statute. As Dylan Mathews recounts here, the relevant statutory language comes from the Commemorative Coin Authorization and Reform Act of 1995, which exclusively concerned the issuance and marketing of commemorative coins. This original proposal was not adopted, but it was incorporated into a later law, retaining the same exclusive focus on the issuance of commemorative coins, and then subsequently amended by the United States Mint Numismatic Coin Clarification Act of 2000. Throughout, the relevant statutes and bill language always concerned the issuance of commemorative coins, and did not implicate the money supply. So while the statutory interpretation offered by platinum coin ploy proponents is superficially plausible, it is not an easy fit with the actual statute from which the relevant provision was born.

For this reason, I am quite skeptical that the platinum coin ploy would be legal. My skepticism is enhanced by my belief that delegated authority of this sort should be explicit. The Treasury Secretary has no inherent authority to issue currency. Insofar as Congress has delegated such authority to the Treasury Secretary, I believe such delegation should be explicit. As the Court has often remarked, we should not presume Congress hides elephants in mouseholes. Yet that is precisely what platinum coin ploy proponents suggest Congress did here. But don’t expect a court to reach this conclusion. For the reasons I noted in my prior post, I doubt whether this question could ever be subject to judicial review.

UPDATE: One question I overlooked, but raised in the comments, is whether commemorative coins are legal tender. According to the U.S. Mint, they are, even though they are sold to the public for more than their face value. This fact undermines my argument that the authorization of commemorative coins in any denomination should not be construed to entail the authority to alter the money supply.

SECOND UPDATE: Harvard’s Larry Tribe thinks the platinum coin ploy would be perfectly legal. Tom Maguire disagrees, pointing out the statute only authorize “bullion” coins — those valued by their weight in a specific metal — and “proof” coins. I think he’s correct about the former, but not so sure about the latter. While proof coins are typically used as commemoratives, they are not necessarily a form of bullion coins. [Added: Maguire makes a more plausible argument that a proof coin must be a counterpart to either a circulating or bullion coin, but I don't know whether that's correct.] Kevin Drum also has more here. He notes that the point of the statutory revision was to allow the Treasury to authorize the issuance of smaller denomination platinum coins for collectors. That may be so, but I don’t believe that’s determinative.

How would this issue be settled? As I’ve noted repeatedly, if the Administration goes down this road it is hard to see how the action would ever be challenged in court. So if the Administration believes it has the authority to take this step — and presumably the Administration would rely upon a legal memorandum to this effect — that would be that.

UPDATE: And here’s some commentary from a precious metals blog that suggests some additional wrinkles.

During the last major debt limit standoff in 2011, pundits and professors debated whether the debt ceiling itself was constitutional. According to some, placing a limit on the issuance of debt to cover the federal government’s financial obligations would violate Section 4 of the Fourteenth Amendment, which provides “The validity of the public debt of the United States, authorized by law, . . . shall not be questioned.” Therefore, some urged the President to disregard the debt ceiling should it be reached. Prominent academics on both sides of the aisle dismissed such arguments, but the question became moot as the President and Congress eventually reached a deal.

Well here we are again, only this time there’s a new argument for how the President should sidestep the debt ceiling: Direct the U.S. mint to issue a $1 trillion platinum coin that could then be deposited in the federal treasury to cover the government’s obligations, at least temporarily. Once the debt limit is increased, the coin could then be destroyed and the federal government could return to business as usual.

Authority for this move is allegedly found in the federal statute authorizing the U.S. mint to make commemorative coins, as the law contains language that would appear to authorize the federal government to issue platinum coins of any denomination by executive fiat. Of course this can’t be legal Kevin Drum protests. Others think it’s quite plausible, even a good idea. Former Representative Mike Castle, who authored the bill in question, thinks its preposterous a law authorizing the minting of commemorative coins could be used to circumvent the debt limit, but former Mint director Philip Diehl, who worked with Castle on the bill, thinks otherwise.

Whether or not the platinum coin ploy would be legal, this is not the sort of question likely to ever end up in court. It is hard to conceive of a plausible scenario in which anyone would have standing to challenge the legality of such a move. Taxpayer standing is highly disfavored and members of congress can’t sue just because they believe the President violated or misconstrued one of their laws. So the propriety of the platinum con ploy will have to be resolved politically; the courts will not be involved.

Using a coin to evade the debt limit may be legal — or simply unchallengable — but I’m with those who question its wisdom. If Congress authorizes spending in excess of federal revenue, it would seem that Congress has authorized whatever debt is necessary to cover its obligations — and in normal times, the debt ceiling is raised as necessary as part of the budget process. Of course, one might also assume that Congress would enact annual budgets, even if for no other reason than that is what the law requires. The 1974 federal budget act requires the President to submit a budget early in the year and obligates Congress to enact each year’s budget by April 15, but the Senate hasn’t even tried to pass a budget in years. And so instead of dealing forthrightly with the nation’s budget problems, we’re talking about whether to mint a $1,000,000,000,000 coin.

Harvard law professor Laurence Tribe has an op-ed in today’s NYT on the constitutional debate over the debt ceiling. He writes:

Several law professors and senators, and even Treasury Secretary Timothy F. Geithner, have suggested that section 4 of the 14th Amendment, known as the public debt clause, might provide a silver bullet. This provision states that “the validity of the public debt of the United States, authorized by law ... shall not be questioned.” They argue that the public debt clause is sufficient to nullify the ceiling — or can be used to permit the president to borrow money without regard to the ceiling.

Both approaches provide the false hope of a legal answer that obviates the need for a real solution.

That sounds right to me. Indeed, I found relatively little in Tribe’s op-ed with which to disagree. He notes that an interpretation under which any action which threatens default is unconstitutional would sweep too broadly, and notes the implications for executive power of any argument that would allow unilateral borrowing.

the argument that the president may do whatever is necessary to avoid default has no logical stopping point. In theory, Congress could pay debts not only by borrowing more money, but also by exercising its powers to impose taxes, to coin money or to sell federal property. If the president could usurp the congressional power to borrow, what would stop him from taking over all these other powers, as well?

Tribe concludes quoting Justice John Marshall Harlan II, “the Constitution is not a panacea for every blot upon the public welfare,” and suggests the solution to the current impasse is not to be found in the constitution, but in the political process.

UPDATE: The Treasury Department responds.

The Honorable Michael McConnell responds to claims that the debt ceiling is unconstitutional and that Section 4 of the 14th Amendment authorizes the President to issue additional debt if necessary to meet existing debt obligations.  Here’s a taste:

Section Four of the Fourteenth Amendment does not create a back-door method for the Administration to borrow more money without congressional authorization. For Congress to limit the amount of the debt does not “question” the “validity” of the debt that has been “authorized by law.” At most, it means that paying the public debts and pension obligations of the United States, as they become due, has priority over all other spending. Each month, the Treasury takes in about $175 billion in new revenues. These are more than sufficient to pay principal and interest when due, as well as pension obligations. . . .

. . . the real effect of Section Four of the Fourteenth Amendment is almost the opposite of what hopeful voices in Washington are saying. Section Four puts the onus on the President to reduce spending in order to avoid default on the debt. It does not permit him to borrow more.

UPDATE: Another point of McConnell’s worth highlighting is that “legislative control over incurring new debt is a fundamental aspect of separation of powers.” Article I, Section 8 expressly grants Congress the power “to borrow money on the credit of the United States.” Despite this provision, some believe that Section 4 of the 14th Amendment authorizes the President to assume for himself a power expressly enumerated to a coordinate branch before taking more modest steps, such as privileging debt payment over other spending. [Note that the executive branch actually does this sort of thing all the time, as when agencies are given statutory obligations that outstrip their appropriations.] Pause for a moment, then, and think about the implications for executive power of the Section 4 argument: That despite the legislature’s refusal (thus far) to authorize additional debt, the President can unilaterally issue additional debt himself before taking other, less extreme measures. Why, this argument is positively Trumanesque.

SECOND UPDATE: Jack Balkin has convinced me that the purpose of Section 4 was “to remove threats of default on federal debts from partisan struggle.” Therefore, the President is precluded from taking any action that would call into question the validity of the public debt and so long as federal receipts are greater than debt service payments, the executive branch is required to prioritize payment of debt and pension obligations above all other spending.

Treasury Secretary Tim Geithner has picked up on suggestions that the debt limit violates Section 4 of the Fourteenth Amendment, though stopped short of saying the Administration would refuse to abide by the ceiling to avoid default.  Meanwhile, much bandwidth is being spilled over the various constitutional arguments.

Jack Balkin points to the drafting history of Section 4 that could support the argument against the debt ceiling.  In particular, he notes that this portion of the 14th Amendment was intended to prevent subsequent repudiation of Civil War debts.  Michael Stern responds noting, among other things, that repudiation and default are not one and the same (a point I also made to Balkin in an e-mail  on Thursday).  Repudiation cancels a debt, whereas default is a failure to pay a valid debt.  In other words, default presumes that the debt is still valid, and does not call into question the validity of the obligation.  Further, even if Section 4 precludes repudiation of valid debts,  this does not mean default is equally unconstitutional, or that the President is authorized to issue new debt obligations to cover the old without Congressional approval.  Balkin responds here, but I am still not convinced.  His argument boils down to a claim that since debt repudiation is off the table, so is all political gamesmanship over how and when debts get paid.

Gerard Magliocca adds an interesting wrinkle, noting the Public Debts Clause could be read to preclude Congressional default as well, though Calvin Massey does not believe the clause grants the President unlimited authority to borrow money.  Michael Abramowicz — one of the few scholars to have focused on these questions — also notes that broad readings of Section 4 and the Public Debts Clause have implications for other laws and would, among other things, cast a constitutional pall over Medicare.  On this basis, he urges a more “modest” approach — an approach Michael Stern does not find so modest.  Meanwhile, Mark Tushnet finds the mere suggestion the President has constitutional authority to violate the  debt ceiling “off-the-wall” (which is not the same thing as saying it is wrong).  Brad DeLong responds to Tushnet here.

Whatever the correct constitutional interpretation of Section 4, there is another question: Whether this question could ever come before the Courts.  I don’t think so.  (Nor does Jonathan Zasloff, who addressed the question a while back.)  First, it would be difficult to find someone who would have Article III standing.  Second, even if standing could be established, courts would likely avoid the issue on political question or other grounds. Brad DeLong is not convinced.  Michael Stern has thoughts on this question too.

UPDATE: Michael Stern responds to Balkin here.  As Stern observes, the force of Balkin’s rejoinder “lies more in the cleverness of its author than the merits of its argument.”

Garrett Epps also has a series of posts on the constitutionality of the debt limit: 1, 2, 3, & 4.

The Huffington Post reports that some Democrats are urging the White House to ignore the debt ceiling on the grounds that it is unconstitutional. The basis for this argument is Section 4 of the Fourteenth Amendment, which provides “The validity of the public debt of the United States, authorized by law, . . . shall not be questioned.” Under this provision, some argue, the federal government is prohibited from defaulting on its debt obligations. Therefore, the argument goes, the President could violate the debt ceiling imposed by Congress if necessary to pay existing obligations.

This is an interesting argument, and one that is unlikely to be resolved by the Courts. There is no indication that President Obama is willing to embrace this argument. If he did, it’s not clear what anyone cuold do about it. Were the White House to authorize the assumption of debt above and beyond that authorized by Congress, it is not clear that anyone would have standing to challenge this action in federal court. As a consequence, the question would be left to the political branches.