By Ezra Klein
The debt ceiling might be the single dumbest feature of U.S. law. Congress decides to spend money and later schedules a separate vote on whether the government will pay its bills. If the government doesn’t pay its bills, calamity ensues.
Moody’s Analytics estimates that even a short debt-ceiling breach could cause a recession. An analysis by the White House’s Council of Economic Advisers modeled a more protracted default and foresaw a crash on the order of the 2008 financial crisis: The stock market falls 45%, unemployment rises by 5 points and America’s long-term borrowing costs are much, much higher. All of this to pay money we already owe and can easily borrow. Madness.
Defenders of the debt ceiling will tell you that the limit has been around a long time and has largely operated to the good. The U.S. has never defaulted on its debts, but the debt ceiling has often motivated compromise between the two parties. That may be true, but it’s a bit like saying that since the U.S. has won every game of Russian roulette it’s played so far, it should keep playing.
And so I understand — and share — the interest in ways to render the debt ceiling null and void. Democrats should have eliminated the debt ceiling when they held Congress and the White House in 2021 and 2022. But they didn’t.
Now, two more unconventional tactics are proving particularly popular in the liberal imagination.
In one, President Joe Biden simply declares the debt ceiling unconstitutional, pointing to the 14th Amendment, which holds that “the validity of the public debt of the United States … shall not be questioned.” Five Senate Democrats, including Bernie Sanders, I-Vt., and Elizabeth Warren, D-Mass., are circulating a letter calling on Biden to do just that. On Friday, 66 progressive congressional Democrats sent Biden their own letter making a similar case.
In the other, the Treasury Department uses a loophole in a 1997 law to mint a platinum coin of any value it chooses — a trillion dollars, say — and uses the new money to keep paying the government’s debts.
In remarks after a meeting with House Speaker Kevin McCarthy, R-Calif., Biden said he was “considering” the argument that the debt ceiling is unconstitutional. The problem, he continued, is that “it would have to be litigated.” And that’s the problem with all these ideas and why, in the end, it’s doubtful that Biden — or any Democrat — will try them.
The legality of the debt ceiling or a trillion-dollar platinum coin doesn’t depend on how liberals read the Constitution or the Coinage Act. It depends on how three conservatives read it: John Roberts, Brett Kavanaugh and Neil Gorsuch, who are the closest the Supreme Court now comes to having swing justices.
It’s easy enough to come up with counterarguments that conservative justices are likely to find persuasive. Michael McConnell, a former judge on the 10th U.S. Circuit Court of Appeals, to which he was appointed by President George W. Bush, just offered one in these pages. “For the United States to fail to pay interest or principal on its debt would be financially catastrophic, but it would not affect the validity of the debt,” he wrote. “When borrowers fail to make payments on lawfully incurred debt, this does not question the validity of those debts; their debts are just as valid as before. The borrowers are just in default.”
The coin gambit is similarly easy to poke holes in, if one wants to. Preston Byrne, a partner at the law firm Brown Rudnick, notes that the Supreme Court has often looked at statutes for which a simple reading of a limited law would seem to grant the executive almost unlimited powers. In many such cases, the court struck down those readings. Congress, the court has said, does not “hide elephants in mouse holes.”
My point is not that more conservative readings of these laws are right in some absolute sense. It’s that no such absolute sense matters. We just watched this Supreme Court wipe out decades of precedent to overrule Roe v. Wade. It has repeatedly entertained cases that even conservative legal scholars thought farcical just a few years earlier. I still remember Orin Kerr, a law professor who clerked for Justice Anthony Kennedy, telling me at the beginning of the Obamacare case that there was “a less than 1% chance that the courts would invalidate the individual mandate,” only to update that to a “50-50 chance” as the court prepared to rule.
The Supreme Court does what it wants to do. Does it want to let the Biden administration dissolve the debt ceiling using a novel legal theory?
If testing the question wouldn’t cost anything, there would be no harm in trying. But I don’t think it would have no cost. The strength of the Biden administration’s political position is that it stands for normalcy. The debt ceiling has always been raised before, and it must be raised now. But if the administration declares the debt ceiling unconstitutional only to have the Supreme Court declare the maneuver unconstitutional, then Biden owns the market chaos that would follow. Who will voters blame in that scenario? Republicans, who say they just wanted to negotiate over the budget, as is tradition? Or Biden, who did something no other president had done, and failed?
Right now, the positions are clear. The White House is open to budget negotiations but opposed to debt ceiling brinkmanship. Republicans are the ones threatening default if their demands are not met. They are pulling the pin on this grenade, in full view of the American people. Biden should think carefully before taking the risk of snatching it out of their hands and holding it himself.