House Minority Leader Nancy Pelosi, in a meeting with journalists today, announced her support for using the 14th Amendment solution to surmount the debt limit.
During last year’s debt limit debate, many commentators observed that the 14th amendment comes in conflict with the notion of a debt limit, as it says, “The validity of the public debt of the United States, authorized by law, including debts incurred for payments of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.” Ultimately, President Obama said that his lawyers informed him that “was not a winning argument.” But months before a new debt limit showdown, Pelosi is coming out pretty strongly in favor of using the so-called “Constitutional option.”
She at first referred to this possibility obliquely while making a larger point about the lack of cooperative spirit between the Republican Party and the Obama administration, but clarified her stance in response to further questions saying “I would like to see the constitution used to protect the country’s full faith and credit.” She didn’t offer a legal argument in favor of the position, but argued on policy grounds that “you cannot put the country through the uncertainty” again, noting that America’s sovereign debt was downgraded by ratings agencies in the wake of the standoff even though it was successful resolved.
“This isn’t just about credit ratings,” the said, “it’s about the dynamism of our economy.”
This is certainly the first public expression of Pelosi’s support for this maneuver, although House Democrats claimed she supported it previously. One clear thing this does, if it becomes consensus opinion in the party, is that it removes a bit of leverage from Republicans. They used the debt limit last time to wring out long-term spending changes worth trillions of dollars. And they have been planning to use it again, paired with the “fiscal slope” of tax and spending changes set for the end of the year. If they don’t have the debt limit to hang over the heads of the opposition, suddenly the leverage switches to Democrats, because by doing nothing, the Bush tax cuts will expire and the defense spending cuts will trigger.
The key to this strategy would be convincing President Obama to threaten its use. As stated earlier, he didn’t seem keen last year, but of course he was also chasing a grand bargain on a parallel track and in some way wanted the debt limit as a forcing mechanism. I don’t know if the calculus has changed in the White House, and much will depend on the elections. But it doesn’t seem like a federal court would force the Treasury Department to stop paying debt, if the 14th Amendment option were invoked. In other words, this is an option well in the realm of possibility. And the Administration definitely acknowledges that they want no part of another economically bruising debt limit fight, which had a material impact last year on GDP and job growth.
Either way, it’s a pretty bold opening move by Pelosi.