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The Next Debt Ceiling Debacle: The Republicans Are Setting an Impeachment Trap, and the Democrats Continue to Misunderstand What Is Happening

Economic Trap ConceptWhen Congress returns from its recess next month, it faces the nearly impossible task of passing a set of appropriations bills that would fund the government beyond September 30, when current appropriations authority expires.  This usually takes months to accomplish, but Republicans have left themselves with only nine scheduled workdays to make it all happen.

Having postured for years about the importance of following required budget procedures, House and Senate Republicans have now prevented the passage of plain vanilla legislation, deliberately impeding the normal functioning of the government.

“Continuing resolutions,” which fund government functions on an ad hoc basis, have become the norm, as the radicalized Republican Party has refused to govern in a responsible fashion.  After endless brinksmanship, Republicans have now created a situation where the best that one can expect is a last-minute continuing resolution in late September, after which we will limp along until that resolution expires, creating the Republicans’ next self-generated crisis.

The Republicans have not, however, been content merely to turn the annual process of passing budget legislation into an endless series of showdowns.  As soon as they became the majority in the House of Representatives in 2011, radical Republicans also attempted—for the first time in history—to use the debt-ceiling statute to create even greater chaos in the budgeting process.

Far from abandoning that disastrous approach, Republicans have unfortunately now decided to make it the centerpiece of their political strategy.  House Speaker John Boehner, just two days ago, announced at a fundraiser that he has every intention of using the debt ceiling “to leverage the political process to produce more change than what it would produce if left to its own devices.”

In other words, the Speaker has decided that his party—which received a minority of the nation’s votes in 2012 in the presidential, Senate, and House elections – will resort to extortion.  What they cannot accomplish through normal means, they will accomplish by threatening to make it impossible for the government to pay its bills.

A Primer on the Debt Ceiling: A Symbolic Law That Never Served Any Important Purpose

What is going on here?  We can all be forgiven for feeling a sense of déjà vu.  After all, the Republicans used the debt ceiling in mid-2011 and at the end of 2012 in exactly the same way that they promise to use it now.  For those readers who have blissfully forgotten the details, however, here are the important facts.

The debt ceiling statute, which was first passed in 1917, and which has existed in its current basic form since 1939, sets a total limit on the federal government’s “obligations.”  That total limit is currently set at about $16.7 trillion.

The statute is a bit odd, however, because it includes among the government’s obligations all of the Treasury bonds currently in existence.  Those bonds, which are the government’s IOU’s, are held by private individuals (in mutual funds, for example), by businesses, by state and local governments, and by foreign governments.  The bonds are also, however, held by the federal government itself.  Several trillion dollars of the federal government’s “debt” is actually money that is held in internal accounts, where one part of the federal government is deemed to owe money to another part of the federal government.

If the debt-ceiling statute actually served any meaningful purpose, such an odd definition of debt would have long since been corrected.  Until the Republicans took over the House in 2011, however, there was simply no reason to bother to fix a law that was utterly symbolic.

Why was it symbolic?  Because the federal government’s debt is necessarily limited, even without a debt-ceiling statute.  When Congress passes its spending and taxing laws, it limits the amount of debt that the federal government will take on, increasing that debt by a fixed amount when it runs an annual deficit, and decreasing it when it runs a surplus.

The debt ceiling, in other words, is entirely unnecessary, even for those who believe that the debt is too high.  Politicians who want the debt to go down can accomplish that by raising taxes or reducing spending, or both.

Even so, is it not possible that the debt ceiling provides, as Boehner suggested, an additional way to reduce the debt?  In fact, it does not, because when the debt ceiling is inconsistent with the taxing and spending laws that Congress has passed, the result is not a new path to debt reduction, but a constitutional crisis.

That Good Ol’ Trilemma Problem: Everyone in Washington Seems to Have Forgotten the Nixon Impoundment Crisis and the Line-Item Veto

How does the debt ceiling put a constitutional crisis into motion?  When Congress passes spending laws, it appropriates money that the President must spend.  Simultaneously, Congress adjusts the tax laws, determining the amount of money that the President must collect.  If appropriated spending exceeds tax revenue, the President is authorized by law to borrow the money necessary to finance the deficit that Congress created.

The debt ceiling purports to say that the President must stop borrowing, when the upper limit is reached.  The problem is that the other laws that Congress duly enacted, regarding spending and taxation, can only be executed if the President exceeds the debt ceiling.

In a series of academic articles published in 2012 and earlier this year, my fellow Verdict columnist Michael Dorf and I described this as a “trilemma,” a situation in which the President will be forced to violate at least one of the laws that Congress has passed: a spending law, the tax law, or the debt-ceiling law.  (We also co-authored a Verdict column in January of this year, summarizing our analysis.)

For reasons that are entirely unclear, the conventional wisdom in Washington quickly coalesced around the idea that the President would, if faced with a trilemma, necessarily violate the spending laws.  For example, in a news article (not an opinion piece) this week, a reporter for The New York Times stated as uncontroversial fact that, if the debt ceiling is reached, “[t]he Treasury would be able to spend money only as it came in. It might be forced to choose certain payments over others—paying bondholders but not Social Security recipients, for instance.”

The reporter should probably be forgiven for his ignorance, because virtually every politician in Washington similarly misunderstands the situation.  Even so, this description is, at best, incomplete.  And at worst, it dangerously mis-describes the President’s obligations in a way that encourages the Republicans to do further damage.

The presumption that the President can simply decide not to obey Congress’s orders to spend money is actually quite radical.  Spending laws are not optional.  They express Congress’s decision that the government’s resources should be used in specific ways.  The laws do not say, “The President can spend as much as . . . , “ but rather, “The President shall spend . . . .”

This is hardly an abstract debate.  During Richard Nixon’s “imperial presidency,” the White House claimed that it had the authority to “impound” funds that Congress had appropriated to be spent on various projects.  Nixon, in his considered judgment, had decided that Congress was wrong in its spending decisions, and he refused to obey the law.

Federal courts quickly ruled that the President does not have the constitutional authority to overrule Congress’s spending laws.  Before the Supreme Court could hear the case, Congress passed the Impoundment Control Act, which reiterated what was already required by the Constitution itself: When Congress tells the President to spend a certain amount of money in a certain way, he must do so.

A later Congress, on the other hand, tried to give the President a line-item veto, by which it purported to authorize the President to strike spending items that Congress had appropriated.  The Supreme Court ruled that even Congress itself does not have the constitutional authority to give away its own powers.  Spending laws are Congress’s to pass, and the President must execute them.

The Republicans Are Setting an Impeachment Trap, and the Democrats Are Playing Along

With that legal background in mind, it is truly astonishing that nearly everyone in Washington blithely assumes that the President’s only choice, when faced with a trilemma, is to cut spending.  Doing so would be a clear violation of his constitutional duties.

The very nature of the trilemma, however, means that the President’s other two choices would also be unconstitutional.  That is, the President would violate the tax law by trying to collect more in taxes than Congress has authorized, and he would violate the debt-ceiling law by trying to borrow more money than the current limit.

Professor Dorf and I have argued that the least unconstitutional choice for the President would be to issue debt in excess of the debt ceiling.  But even setting that argument aside, it is undeniable that the President will, if Republicans refuse to increase the debt ceiling, necessarily break at least one law.   The Republicans are setting a trap, giving them grounds to impeach the President, no matter what he does.

Some might suggest, however, that the Republicans would never try to impeach the President, so long as he disobeys the spending laws, both because he would be following the conventional wisdom, and because they would look ridiculous if they blamed the President for doing exactly what they claim to want him to do (cut spending).

It is ridiculous, however, to think that these Republicans would worry about looking ridiculous.  They have made it clear that they view President Obama as an illegitimate president, and there is a strong movement in the House to find some reason—any reason at all—to remove him from office.  While it is possible that the elders of the party could stop the radicals from running wild, recent history suggests quite the opposite.

More importantly, the discussion in Washington would quickly turn to the President’s violation of the law.  No matter how the President “prioritized” his illegal spending cuts, they would be illegal, and there would be real people who would be the victims of his cuts.  People who were owed money, under the laws of the United States of America, would not have been paid in full and on time.  The President would have made that decision, choosing to ignore Congress’s order to spend as it deemed appropriate.

The President’s defense, of course, would be that he had been given nothing but illegal options, and that the Republicans had created his impossible situation.   Given that the President’s party dominates the Senate, he would never actually be removed from office, anyway.  He could certainly be impeached, however, and the court of public opinion could easily be swayed by the flesh-and-blood victims of his decisions.  In any case, there is no reason to believe that Republicans would feel any hesitation about blaming the President for the illegal spending cuts.

How Far Will Republicans Take This?  Shutdowns, the ACA, and Beyond

As it happens, the debt ceiling is not going to become binding law until after the current continuing resolution expires.  That means that the possibility of a government shutdown will happen before the possibility of a trilemma (and a Presidential decision to default on the government’s obligations) does.  The shutdown would happen on October 1, whereas the latest estimate is that the trilemma would hit about two weeks later.

Notably, this sequence of events is not what the Republicans wanted.   They had very publicly expressed their desire to have a debt-ceiling showdown before the current fiscal year ended.  Because of the sequestration-related spending cuts that Republicans refused to cancel, however, the federal debt has grown more slowly than Republicans had hoped.

Why would the Republicans care about the sequencing of their two crises?  Government shutdowns have happened before.  They are disruptive, and they harm the economy, but they are not unprecedented.  Threatening a shutdown is irresponsible, but nearly everyone has come to accept the likelihood that House Republicans will inevitably shut down the government at one point or another.

By contrast, the United States has never defaulted on its obligations.  As a matter of extortion, therefore, threatening to destroy the government’s perfect record of paying its bills is a much more aggressive position for Republicans to take.

The timing is even less favorable for Republicans, moreover, because even the short attention span in American politics is longer than two weeks.  If Republicans pass spending laws in late September, and even if they only pass a short-term continuing resolution to avert a shutdown, it will be obvious that they have simply created a trilemma that will occur two weeks down the line.  President Obama will rightly insist that they adjust the debt ceiling, too, when they pass their spending laws.

Even so, Republicans have gone far beyond the nonsensical “Boehner Rule,” which ties spending cuts to increases in the debt ceiling.  As I expected, they have now begun to make non-budgetary demands as well, with many Republicans now insisting that they will not move forward on any budgeting legislation unless the Affordable Care Act is repealed.

How long will it be before Republicans demand that a constitutional amendment to ban abortion be passed, in exchange for even short-term budgetary sanity?  Or before they insist on a national voter-ID law, which would be designed to suppress minority votes?  Or before they refuse to budge, unless the Environmental Protection Agency is completely dismantled?

If the President were, instead, to announce that he will not “prioritize” any spending, and that he will borrow the amount of money sufficient to obey Congress’s taxing and spending laws, he would still almost surely be impeached.  He would, however, make it clear that Republicans will not achieve their goal of forcing him to make spending cuts beyond levels that even Republicans are willing to vote for.

In the end, as long as Republicans control at least one House of Congress, they can force a series of government shutdowns.  But it remains within the President’s power to make the debt ceiling a non-issue.  He has, so far, simply announced that he will refuse to negotiate over the debt ceiling.  With Speaker Boehner promising “a whale of a fight” over the debt ceiling, however, the President might soon find that his bluff has been called.  What will he do then?

Neil H. BuchananNeil H. Buchanan, a Justia columnist, is an economist and legal scholar, a Professor of Law at The George Washington University, and a Senior Fellow at the Taxation Law and Policy Research Institute, Monash University (Melbourne, Australia). He blogs at DorfonLaw.org, and he is the author of The Debt Ceiling Disasters: How the Republicans Created an Unnecessary Constitutional Crisis and How the Democrats Can Fight Back.
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  • wheasonjr

    It does seem that, when looked at objectively, that the president may not be so concerned about spending orders. The main concern in this article seems to be centered on the Republicans. I would be interested to know how Neil would characterize the President changing the parameters of the Health Care Act? Seems to me that Act, now law, carries some implications with it unless with regard to this presidents government something that is voted in by citizens carries no weight. This is putting aside the fact that he also chose to give big business a break and not the normal guy out there. Now I would assume that the normal guy that would have been covered by the big business part of the act will now have to buy it on their own. I can understand his side of things after all the Democrat party does get a lot of support from big business contrary to popular belief, a bill of goods sold to the people. Dianne F. for instance, her husband is a primary in the mining industry, in fact the largest mining company in the world at present time.

  • http://www.facebook.com/people/Fred-Wilder/100002131866339 Fred Wilder

    Thanks for showing us there is no hope left for the democratic process in the USA, time to start planning my move to a sane society.

  • Max Herr

    Sorry I missed seeing this mindless rant of Prof Buchanan until now.
    Why not center the argument where credit is due? The lack of leadership exhibited by President Obama since first taking the oath of office is astounding. In not one single year of his two-term administration to date has the United States of America actually had a budget as required by law.
    We have been operating with only a series of temporary spending legislation, each of which gets stuffed with pork-fillers and other non-essential additives that only make the matter worse. The average housewife or househusband can do a superior job of budgeting . . . by spending only what is available in one’s own pocket.
    If there is any IMPEACHABLE OFFENSE, it would be that lack of leadership. Fortunately for the President, the inability to do more than talk like a politician is not yet a crime in America. It ought to be. Then we would have an additional 435 to 535 office vacancies in Washington, DC.

  • Kathy Skamelka

    Every Senator that does not stay and work until a real bill is put together that DOESN’T include riders for the gop………..shout be charged with TREASON AGAINST THE PEOPLE. What they have changed to make their jobs cushy should be eliminated. It should be a job of honor that works for the betterment of ALL. Their salaries need slashed and they should have to punch in and out via fingerprint and if they do not work at least 15 days a month they should be ineligiable for retirement, of which theirs needs a serious slashing!!!

 

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