The Learning Curve

New tricks for an old dog.

Why Obama cannot use 14th Amendment on debt ceiling

Article I, Section 8, of the U. S. Constitution states, The Congress shall have Power To “borrow Money on the credit of the United States.” Section 4 of the 14th Amendment provides:

“The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.”

The authority to borrow granted to Congress in Article I of the U. S. Constitution is the source of Constitutional legitimacy for the validity of U. S. debts “authorized by law,” referenced in the 14th Amendment. On the face of it, it’s clear that Section 4 of that Amendment was intended to invalidate the debts “incurred in aid of insurrection or rebellion against the United States” by the Confederate states, and the prefatory statement is merely a re-affirmation of validity for debts incurred or assumed by means of the standard legislative process.

The two Constitutional provisions, taken together, are consistent, and there is no apparent reason to suspect that the framers of the 14th Amendment intended to shift the borrowing power of the United States to the Executive branch.

If President Obama ever attempted to authorize the issuance of Treasury bonds by unilateral Executive Order, any right thinking investor would immediately and reasonably question the legitimacy of the obligation. There would be additional risk injected into the investment calculation by the novelty of the situation and the considerable risk that the bond issue would be challenged in court.

The additional risk produced by the uncertainty of the governmental process would defeat the purpose of avoiding default by means of extreme and unconventional measures. In the event of default or unilateral executive borrowing, the results would be the same. More risk and higher interest rates.

The main reason the President can’t act unilaterally by borrowing in excess of Congressional authorization is that it creates more problems than it solves.

  • First, there’s at least a 50-50 chance the House of Representatives would pass Articles of Impeachment against the President, which would incite yet another circus freak show distraction.
  • Second, by being an extreme measure, the act itself would escalate a non-problem into an emergency situation.
  • Third, it would remove the pressure to act from Congress, where it properly belongs.
  • Fourth, it would scare the hell out of nearly everyone.

Related post: How will Obama solve the debt limit problem?

Advertisements

Written by Tom Fox

07/14/2011 at 9:36 am

Posted in Politics

One Response

Subscribe to comments with RSS.

  1. […] should Congress and the President fail to achieve agreement.  I have previously opined that President Obama cannot use the 14th Amendment because it would spook the bond market, but things have changed. Now, here is how this incredibly […]


Comments are closed.

%d bloggers like this: