The Debt Limit and the Constitution: How the Fourteenth Amendment Forbids Fiscal Obstructionism

Article excerpt

ABSTRACT

The statutory debt limit restricts the funds that can be borrowed to meet the government's financial obligations. On the other hand, the Fourteenth Amendment's Public Debt Clause mandates that all the government's financial obligations be met. This Note argues that the Public Debt Clause is violated when government actions create substantial doubt about the validity of the public debt, a standard that encompasses government actions that fall short of defaulting on or directly repudiating the public debt. The Note proposes a test to determine when substantial doubt is created. This substantial doubt test analyzes the political and economic environment at the time of the government's actions and the subjective apprehension exhibited by debt holders. Applying this test, this Note concludes that Congress's actions during the 1995-96 and 2011 debt-limit debates violated the Public Debt Clause, though Congress's conduct during the debate over the debt limit in 2002 did not. And under a departmentalist understanding of executive power, a conclusion of this nature would be the basis for the president to ignore the debt limit when congressional actions create unconstitutional doubt about the validity of the public debt.

INTRODUCTION

Less than a year after Standard & Poor's historic downgrade of U.S. debt, Speaker of the House John Boehner declared that Republicans would never quietly acquiesce in another increase in the statutory debt limit. (1) Although the statutory debt limit, (2) sometimes called the "debt ceiling," has been increased under every president since its codification in 1939, (3) there has been a noticeable shift in recent decades that has caused debt-limit legislation to meet increasingly hostile opposition. (4) And there are signs that the opposition--and the ensuing debate--are becoming more contentious with each legislative proposal. (5) Yet one thing is clear: authorizing such increases is a fixture of American fiscal policy. Though the political landscape surrounding government debt has never been completely tranquil, recent debates have been especially combative. This Note presents a way to distinguish between constitutionally permissible political battles and those that cross the line established by the Public Debt Clause, by asking whether government action creates substantial doubt about the government's ability or willingness to meet its financial obligations.

Since the origin of the Republic, Congress has placed limits on the federal government's borrowing authority. (6) Before World War I, Congress gave the executive borrowing authority only for specific actions through targeted legislation. (7) The modern aggregated limit-which allows the Department of the Treasury (the Treasury) to incur debt on whatever terms necessary--traces back to 1939. (8) The current statute creates an overall ceiling on the aggregate amount of government indebtedness. (9)

The debt limit has always factored prominently in American fiscal policy, often as a source of controversy. From its very inception the debt limit required an increase during each year that the United States was involved in World War II. (10) And though "[c]ongressional executive interactions with respect to the debt limit remained, for the most part, harmonious" (11)in the 1950s, even Republican members of Congress were not sanguine about the prospect of increasing the debt limit as often as President Eisenhower desired. (12) The administrations of Presidents Kennedy and Johnson faced strident opposition to debt limit increases during what had been, in comparison, fairly routine votes under Eisenhower. (13) This conflict was partly a function of the increasing frequency of debt-limit increases (14) and partly a result of disagreement over the ideological presuppositions of Keynesian economic theory, which heralded budget deficits as effective economic stimuli. (15)

In the 1970s, the debt limit began to be used as more than a mere ceiling on governmental borrowing authority. …