Last week, Treasury Secretary Janet Yellen informed Congress that the United States had hit the debt ceiling. Because the statutory definition of debt includes money the government owes itself, Yellen’s announcement was not especially alarming. The Treasury Department will take “extraordinary measures” to enable the government to pay its bills for several more months. Yet as the witching hour approaches, real economic damage could occur.
Congress has raised the borrowing limit dozens of times in the past. Why would it risk financial disaster by failing to do so now?
House Republicans have said they want spending cuts in exchange for raising the debt ceiling. However, the demand is a non sequitur. The government needs to borrow money to pay for spending Congress has already authorized. If House Republicans want the government to spend less money in the future, they can vote for less spending in the appropriations process. By refusing to raise the debt ceiling unless the Senate and President Biden acquiesce in spending cuts, House Republicans are holding the global economy hostage.
Understandably, then, Biden has repeatedly stated that he will not negotiate over the debt ceiling. After all, negotiating with hostage takers only encourages more hostage taking. The president thus seeks to call House Republicans’ bluff.
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Unfortunately, they might not be bluffing. Even if House Speaker Kevin McCarthy would be inclined to back down rather than risk triggering an economic meltdown, the concessions he made to the most radical members of his party in order to gain the speakership could prevent him from doing so.
What should Biden do if Congress fails to raise the debt ceiling before the extraordinary measures run out? Section Four of the 14th Amendment speaks to that question. It states: “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.” The provision was added to the Constitution after the Civil War but, as the Supreme Court recognized in the 1935 case of Perry v. United States, “its language indicates a broader connotation.” Public debt, the court observed, extends beyond payments for costs the Union incurred fighting the Confederacy; it also extends beyond the bonds at issue in Perry, “embracing whatever concerns the integrity of the public obligations.”
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Put differently, the 14th Amendment, as sensibly construed by the Supreme Court, obligates the government to pay all of its bills: interest on Treasury notes; money owed by law to Social Security recipients; bills from doctors and hospitals entitled to reimbursement for treating Medicare patients; salaries for air traffic controllers, members of the armed forces, and other government employees; etc. Failure to pay any of these obligations would violate the amendment.
To be sure, some lawyers and pundits contend that the 14th Amendment requires only that the government pay principal and interest on federal bonds. They note that even after extraordinary measures run out, the government will continue to receive enough money in taxes and fees to cover such payments. Thus, they say, reaching the debt ceiling would not result in default. So long as the government pays bondholders, it can stiff everyone else.
That narrow reading of the 14th Amendment contradicts Perry. Moreover, the narrow reading creates a further problem: Even after the debt ceiling is reached, incoming revenues will suffice to cover interest payments plus some but not all of the government’s other obligations. Which bills should be paid? Proponents of the narrow reading say that the administration can prioritize among spending obligations. They are mistaken.
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The Constitution gives Congress, not the president, the power to spend — or not to spend — money. As the Supreme Court confirmed when Richard Nixon tried to impound appropriated funds, the president has no power to cut spending. Accordingly, even apart from the 14th Amendment, Biden would act unconstitutionally were he to pay some but not all of the government’s bills.
To be sure, the Constitution also gives Congress the power to borrow money. Thus, borrowing in excess of the debt ceiling would also be unconstitutional. However, should Congress fail to raise the debt ceiling before extraordinary measures run out, the president would have no constitutional options. He cannot unilaterally impose taxes, cut spending, or borrow money, but he also cannot simultaneously comply with Congress’s mutually contradictory instructions to spend more than the sum of authorized borrowing and taxation.
If McCarthy and House Republicans do not blink, Biden will need to choose the least unconstitutional option. To increase taxes or cut spending would require him to make numerous fundamentally legislative policy judgments. Whose taxes? What spending? How much of each? By contrast, if Biden were to direct the Treasury to issue new bonds, he would know exactly how much to borrow: the precise difference between revenues and obligations. Bypassing the debt ceiling rather than selectively refusing to pay bills due would minimize the usurpation of legislative power.
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Biden has been reticent about what he will do if Congress fails to act in time. That silence arguably serves a strategic purpose because revealing contingent plans could ease the pressure on Congress. At some point, however, the dynamic may shift. If it becomes apparent that the radicals in charge of the House are hoping a debt ceiling impasse leads Biden to cut spending, he should publicly announce his intention to issue bonds in excess of the debt ceiling. It’s his least unconstitutional option, and it might even bring congressional Republicans to their senses.
Michael C. Dorf is Robert S. Stevens Professor of Law at Cornell Law School. He is coauthor of the paper “How to Choose the Least Unconstitutional Option: Lessons for the President (and Others) from the Debt Ceiling Standoff” and three follow-up articles.
