Marc Ambinder writes that the Administration may be keen to stall the debt limit talks and allow the pressure to rise as the deadline nears. Many of John Boehner’s House Republican caucus don’t believe there is such a thing as a deadline, so I don’t see how this will be successful; it’s not like Wall Street hasn’t already put pressure on Republicans. Anyway, some “Hill Source” – I’m guessing a House Republican – leaked to NBC News that the August 2 deadline may shift out to mid-August and even October if the US starts selling gold (without Glenn Beck’s show how will they find a dealer?). The debt limit deadline isn’t quite like a government shutdown deadline; there’s some fluidity there and some payments, based on intake, could still be made. Anyway, this is a very dangerous game; as Jared Bernstein notes, just a small rise in the interest rate due to debt limit jitters, even as low as 50 basis points (0.5%), could lead to $50 billion in extra annual debt service. This would only compound over time, as Lawrence Lindsey explained the other day.
So waiting out the opposition doesn’t seem like a good strategy. There is a strategy that works, however, one that some Democratic Senators have caught onto: reading the Constitution.
Growing increasingly pessimistic about the prospects for a deal that would raise the debt ceiling, Democratic senators are revisiting a solution to the crisis that rests on a simple proposition: The debt ceiling itself is unconstitutional.
“The validity of the public debt of the United States, authorized by law… shall not be questioned,” reads the 14th Amendment.
“This is an issue that’s been raised in some private debate between senators as to whether in fact we can default, or whether that provision of the Constitution can be held up as preventing default,” Sen. Chris Coons (D-Del.), an attorney, told The Huffington Post Tuesday. “I don’t think, as of a couple weeks ago, when this was first raised, it was seen as a pressing option. But I’ll tell you that it’s going to get a pretty strong second look as a way of saying, ‘Is there some way to save us from ourselves?’”
Some other Senate Democrats, including Patty Murray (D-WA), looked at the 14th Amendment idea as “fascinating.” I wrote about the Constitutional question last week. It’s a solution taken seriously by many experts. It would be a fascinating fight. The courts don’t have a lot of case law in this area, but there is a case from 1935, where the Supreme Court said that the 14th Amendment applied to all federal debt. The opinion reads, “We regard it as confirmatory of a fundamental principle which applies as well to the government bonds in question, and to others duly authorized by the Congress as to those issued before the amendment was adopted. Nor can we perceive any reason for not considering the expression ‘the validity of the public debt’ as embracing whatever concerns the integrity of the public obligations.”
Being a political question, the high court may choose to simply not take the case. Then there’s the question of standing. Congress could judge themselves to have standing, but that would take a joint resolution, and you see here that Senate Democrats are thinking about supporting this option.
There are two other issues here. One, just opening the question of whether the debt limit can be abrogated or not might be enough to spook the markets. It would be better to just swallow hard and pass the bill. But if the bill cannot otherwise be passed, there may not be another choice. Second, the House would almost certainly move to impeach the President on this for reading the Constitution too literally. That may end up proving to be a negative for them overall but a positive in terms of their base; it’s a bit unpredictable.
But there are a series of bad options here. One involves a deal that will certainly hurt the economy; one involves an impasse that could lead to another financial crisis. Against those, ignoring the debt limit looks pretty good. More on how this would work from Bruce Bartlett.