Joe Biden can use executive power to defuse the debt ceiling bomb, but that comes with risks of its own.
Treasury Secretary Janet Yellen sent a note to congressional leadership with a message that you do not want to hear from the official charged with running America’s finances: Because of yet another fight over raising the nation’s statutory debt limit, the Treasury Department would need to begin using “extraordinary measures” to keep paying the country’s bills. If lawmakers did not act to raise the ceiling, those measures could be exhausted by early June, leaving the US in a state of default.
The ceiling, a legal limit on how much outstanding debt the federal government can hold, sparked standoffs between the Democratic White House and Senate and the GOP House in 2011, and again in 2013, and is now set to unfold yet again. The Republican House rebels who voted against Kevin McCarthy in the speaker election over a dozen times finally forced a promise to never pass a “clean” debt ceiling increase (that is, one without spending cuts attached) in exchange for their votes. On Monday, the majority adopted new rules that will make it more difficult to increase the debt limit and make it easier for Republicans to insist that raising the ceiling will need to come with spending cuts.
Breaching the ceiling and violating what Yellen called the “full faith and credit of the United States” would be almost incomprehensibly bad. Beth Ann Bovino, chief US economist at Standard and Poor’s, was hardly alone in 2017 when she predicted that “the impact of a default by the U.S. government on its debts would be worse than the collapse of Lehman Brothers in 2008, devastating markets and the economy.”
And yet America keeps running this apocalyptic Groundhog Day, one that, thanks to Yellen’s letter, now comes with a countdown clock. Luckily, there is a way out of the dilemma: ending the debt ceiling once and for all. The best way to do this is through legislation, but given the stranglehold of Republican hardliners in the House, that looks impossible. The administration couldn’t raise the debt ceiling on its own, but experts have floated a few options for the president to consider to avert a crisis. None of these are free from risk, and all would likely spark considerable litigation that could in turn cause market turmoil. But all would be preferable to defaulting on US debt.How Biden could kill the debt ceiling
There are at least four ways a president could nullify the debt ceiling without Congress.
It’s strange but true: As blogger Carlos Mucha pointed out back in 2010, an existing law gives the US treasury secretary the power to issue platinum coins of any value she wishes.
The intention of the original 1997 law was about making it easier to produce platinum coins for the international coin collector market, but in 2011, Mucha revived the idea in the context of that year’s debt ceiling standoff. The treasury secretary could issue, say, a platinum coin worth $2 trillion, deposit it into the Treasury’s account at the Fed, and use those funds to sustain the government until the debt ceiling is raised.
The Obama administration found the idea too unserious there to use, but the legal case for minting the coin is as solid as platinum. Just ask debt ceiling hardliner Sen. Mike Lee (R-UT), who was sufficiently concerned about the option to introduce legislation to close the platinum coin loophole. The plain text of the 1997 law clearly allows the treasury secretary to do this, and Jay Powell, the Fed chair who in a past career was an expert on the debt ceiling and its dangers, is arguably legally required to accept the coin as a deposit.
You can also imagine more serious variations on the concept. Progressive economist Mike Konczal once proposed issuing a $20 billion coin every day to keep the government running until Congress agrees to abolish the debt ceiling for good. And a $20 billion coin is, what, 1 percent as silly as a $2 trillion one?
Some legal scholars have argued that Section 4 of the 14th Amendment, which specifies that “the validity of the public debt of the United States, authorized by law … shall not be questioned,” renders the debt ceiling unconstitutional, as it threatens the validity of the US’s public debts by creating the possibility of default.
This is hardly a consensus position among constitutional law experts, but if Biden were to declare he was ignoring the debt ceiling because it’s unconstitutional, it’s not clear that anyone would have legal standing to sue him and challenge the decision. That helped encourage a number of political actors, from then-House Minority Leader Nancy Pelosi to former President Bill Clinton, to urge Obama to invoke the 14th Amendment during his debt ceiling showdowns.
Obama declined repeatedly, arguing in 2013 that “if you start having a situation in which there’s legal controversy about the US Treasury’s authority to issue debt, the damage will have been done, even if that were constitutional, because people wouldn’t be sure.”
University of Florida law professor Neil Buchanan and Cornell law professor Michael Dorf have, in a series of papers, proposed a way out of the debt ceiling that’s related to but distinct from the 14th Amendment option.
Buchanan and Dorf note that Congress, by setting spending and tax policy as well as a debt limit, has given the president three mandates: to spend the amount Congress authorizes, to tax the amount Congress authorizes, and to issue as much debt as Congress authorizes. When the debt ceiling is breached, it becomes impossible for the president to obey all three of these legal requirements.
Prioritizing spending on certain activities and cutting it elsewhere usurps Congress’s spending power by cutting spending unilaterally. Raising taxes without congressional authority would usurp Congress’s taxing power.
