Several Senate Democrats are advocating for President Joe Biden to utilize the power granted by the 14th Amendment to increase the debt limit through executive action. One such Democrat, Elizabeth Warren of Massachusetts, expressed her support, stating:
“The 14th Amendment is not anyone’s first choice. The first choice is that the Republicans raise the debt ceiling because the United States government never, ever, ever, ever defaults on its legal obligations. But if Kevin McCarthy is going to push the United States over a cliff, then it becomes the president’s responsibility to find an alternative path.”
Given her background as a former law professor and her extensive tenure as a senator, it is highly likely that Elizabeth Warren is aware that maintaining the current debt ceiling does not directly lead to default. Instead, it necessitates the government to pursue a balanced budget—a practice that should ideally be implemented regardless.
It is worth noting that a thorough examination of the 14th Amendment would reveal that it does not confer any explicit authority to the president to “utilize” it as a means to incur additional debt.
Not Raising the Debt Limit Just Means Balancing the Budget
The debt limit serves as a legal restriction on the amount the federal government can borrow, currently set at $34.4 trillion as per existing law. If Congress chooses not to modify this law, the limit will remain unchanged, making it illegal for the government to borrow beyond that threshold. Consequently, the government would need to utilize its current revenue to fulfil its debt obligations.
Is it possible for the federal government to operate within those means? Certainly. The current revenue is approximately eight times greater than the current interest payments, indicating that there is sufficient income to cover existing debt while maintaining most government services. However, it would require adjustments to other areas of the budget, and there are likely numerous suggestions from readers on how to achieve that.
These facts are widely known and supported by past experiences. We have encountered previous debt limits on multiple occasions without experiencing a default. Typically, the outcome involves the temporary closure of a few federal facilities. For instance, during the last occurrence, Rocky Mountain National Park was closed, but the responsibility was assumed by the Colorado state government without significant issues.
Nevertheless, whenever a new debt limit approaches, unscrupulous politicians and media propagandists falsely claim that default is imminent. This claim is so evidently untrue that we can only deduce that their concerns are not truly centred around default but rather something else.
So, what is this “something else”? It could be the fear that people might realize they do not require excessive federal spending and that they might develop a preference for a balanced budget.
The 14th Amendment
The 14th Amendment was officially ratified in 1868, shortly after the conclusion of the Civil War. It holds the distinction of being the longest amendment ever adopted, as it tackles a wide range of issues. One of the objectives of this amendment was to guarantee that forthcoming Congresses, even if influenced by representatives from former Confederate states, would honour the debt incurred during the Union Civil War.
Within the amendment, there are five sections, but Sections 4 and 5 are particularly pertinent to our current discussion. Let’s delve into the relevant language of those sections:
“Section 4. The validity of the public debt of the United States, authorized by law … shall not be questioned …
“Section 5. The Congress shall have power to enforce, by appropriate legislation, the provisions of this article.”
Let’s examine the specific language of the 14th Amendment:
- The language states that the validity of the United States public debt should not be questioned. This provision implies that the federal government cannot employ any pretext or justification to refuse payment on debt instruments, such as savings bonds and Treasury bills.
- Additionally, the amendment confers upon Congress the authority to pass legislation ensuring that the country’s debt obligations are met.
However, it is important to note what the language does not explicitly state:
- It does not specify that the government must accumulate additional debt to fulfil existing debt obligations. Congress has the flexibility to meet its obligations using existing revenue.
- It does not state that Congress must modify the legal restrictions on borrowing.
- While the amendment grants powers to Congress, it does not grant similar authority to the president, apart from the responsibility to enforce laws enacted by Congress. This is in accordance with the Constitution, which mandates that the president “take Care that the Laws be faithfully executed” (Article II, Section 3). One of those laws the president must uphold is the national debt limit.
This Isn’t a Mere Technicality
The principle that grants financial powers to a representative legislature rather than the executive is fundamental to our political system. It is a principle that many individuals have sacrificed their lives for, emphasizing its significance.
In the 17th century, when King Charles I wielded financial powers without the consent of Parliament, it directly resulted in the English Civil War. Ultimately, the king was defeated and faced execution (quite literally).
Moving into the 18th century, King George III and a Parliament that did not represent the interests of the American colonies attempted to impose taxes on the colonists. This directly sparked the American Revolution. Once again, the king was on the losing side. While he managed to keep his life, he lost all his authority within the United States and a substantial portion within Britain.
President Biden would be wise to consider these historical precedents.
The mere fact that individuals like Elizabeth Warren even mention the possibility of the president violating the law and unilaterally assuming additional public debt speaks volumes about their perspective and intentions.
The Makings of Calamity
Among those advocating for raising the debt limit, there is a common talking point that failure to do so would result in a “calamity.” Treasury Secretary Janet Yellen has made such claims. However, based on past experiences, we know that this assertion is not accurate.
Yet, let’s consider a scenario that could genuinely lead to calamity: Imagine if President Biden, in order to meet current debt obligations without reducing spending, attempts to issue debt instruments under his own authority, perhaps calling them “Biden Bonds.” However, if the Supreme Court were to strike down this autocratic decree (as it has done with several of Biden’s other executive orders), what would be the implications for the creditworthiness of the United States?
Considering that individuals in the bond market are risking their own money, unlike Warren and Yellen, how many of them would be willing to invest in Biden Bonds? And if they were unwilling to do so, what would be the impact on the credit standing of the United States?
These are important considerations, as the actions and decisions made by market participants who have a direct stake in the financial outcome can significantly influence the credibility and perception of U.S. creditworthiness.
How Can We Avoid This in the Future?
For over five decades, a significant majority of the American population has expressed support for a constitutional amendment that would require the federal government, with few exceptions, to maintain a balanced budget. Such an amendment would serve as a deterrent to the accumulation of ever-increasing debt by the government.
In 2017, Rob Natelson drafted an initial version of this proposed amendment. It is designed to be easily understood, without excessive technicalities. Its essence is simple: before Congress can raise the debt limit, meaning before it can incur a budget deficit, it must obtain the approval of a majority of state legislatures representing a majority of the U.S. population.
The absence of a balanced budget amendment can be attributed to two primary reasons. Firstly, Congress has refused to propose such an amendment for ratification by the states. Secondly, advocates for the national power structure have been misleading Americans about the procedure for proposing an amendment through a convention of states.
However, it is only a matter of time before the American people grow weary of this delay and compel their state lawmakers to convene a constitutional convention. Let us hope that this action will occur before it is too late to address the pressing fiscal challenges facing our nation.