Monday, September 30, 2013

Henry Aaron Calls For Obama To Ignore Debt Ceiling

This Henry Aaron is not the home run hitting former baseball player, but the longtime top tax expert at the Brookings Institution.  In today's New York Times he has an op-ed entitled "Obama Should Ignore Debt Ceiling: (I have actually linked to Mark Thoma's economist view links for today, but it is the top one there).  He makes numerous valid points.  One is to point out that if the debt ceiling is not raised then the president will be in a situation of inevitably violating the law one way or another.  On the one hand, he must have the Treasury pay bills as they come in that have been lawfully approved by Congress with him signing on.  OTOH, of course, he is not supposed to borrow money if the debt ceiling has been hit in order to pay for those bills (and he cannot unilaterally raise taxes to do so, either, a point not usually noted, and clearly way off the charts constitutionally). 

Aaron notes that there was a discussion of this conundrum in 2012 in the Columbia Law Review by Neil H. Buchanan and Michael C. Dorf who concluded that indeed there are only three options in this case: 1) do not pay lawful bills, 2) arbitrarily raise taxes, and 3) simply ignore the debt ceiling and proceed as usual.  After noting that these are all bad option and technically illegal, with Aaron adding "unconstitutional because violating the law," they conclude that #3 is the least bad of the bad options.  Aaron notes that Obama doing this may well lead to him being impeached by the House, but he would not be convicted by the Senate, and it would avoid multiple disasters to the world economy.  Aaron also notes that getting rid of the debt ceiling will end the periodic attempts at blackmail by opposition parties trying to achieve ends they could not get through normal legislative processes.  All of this is correct, needless to say.

The one thing that I find curious about this is that neither Buchanan and Dorf nor Aaron raise the possibility of not merely ignoring the debt ceiling, but going further to put the nail in its coffin (or drive the stake through its heart, if you prefer) by declaring it unconstitutional, with Part D of the 14th Amendment that declares that the national debt must be paid the obvious base for doing so.  I note that not only Bill Clinton and Bruce Bartlett have urged this, but also Moody's prior to the last raising of the debt ceiling, which was followed by them downgrading US debt precisely because of the political silliness and uncertainty involved in this process of raising the debt ceiling. 

Indeed, Aaron emphasizes how ridiculous the debt ceiling is by calling it a law "like a human appendix," with no discernible function, given that the budget already sets a course for a particular deficit level that will change the debt level.  As has been said a million times, raising the debt ceiling only ratifies what has already been committed, the source of all the contradictions.  I also remind one and all that the US is the only nation in world history to have ever had such a nominal debt ceiling.  It is time to have a fiscal appendectomy and remove this absurdity most thoroughly and completely, once and for all.

Barkley Rosser


Unknown said...

In addition to the Constitutional 14th Amendment authority, the President can and should declare that appropriations that go beyond the debt ceiling have repealed the debt ceiling law.

Unfortunately, we have a President who fundamentally isn't on our side, and so instead of fighting, will do what he really wants and negotiate away our "entitlements".

ProGrowthLiberal said...

Brad DeLong wants the Treasury to mint 1000 billion dollar coins.

I would put the face of Dr. Evil on these new coins! said...

John R. Obama is making all these tough noises, but I fear he is not quite ready to bit the bullet on the constitutionality issue. Somehow Laurence Tribe got to him two years ago arguing it is constitutionsal, and the people Henry Aaron cites seem to agree. But they and Aaron say he should just ignore the debt ceiling anyway. I suspect that this time whatever happens, it will not be a negotiation over SS or Medicare or Medicaid, although there might be an eimination of the medical device tax or some other item from ACA.


Brad is out to lunch on this one. Maybe under pressure from Obama they might relent, particularly Treasury, but both Treasury and the Fed have very publicly stated that they are not going to do a trillion dollar coin deal, and both are needed to cooperate and participate to pull it off. While there was a lot of talk about this back in 2011, this simply is not on the table.

Redwood said...

"periodic attempts at blackmail by opposition parties trying to achieve ends they could not get through normal legislative processes."

Attempts at blackmail by ONE opposition party. The other party has never pulled this kind of bullshit.

Don Levit said...

John wrote:
The President should declare the appropriations that go beyond the debt ceiling have repealed the debt ceiling law. Unfortunately, we have a President who will negotiate away our entitlements.
I don't think the President has to declare anything about appropriations regarding entitlements such as Social Security.
As long as the trust fund shows a positive balance, Treasuries can be redeemed, automatically, without an appropriation.
Of course, this is not without cost.
Doing so raises the deficit and the debt held by the public.
Don Levit said...


Neither I nor any commenter here made the remark that you go out of your way to refute. I think you have this blog confused with another one.

Don L.,

Agree, I think.

Redwood said...

It's a direct quote from your original post. The use of "opposition parties" implies "both sides do it", which is false. said...


You are right, I did use it. Actually, there have been attempts by Dems in opposition to GOPs, notably when Reagan was prez, to try to demand things of prez at time of debt ceiling increases, which led Reagan to make some choice and widely repeated remarks about the irresponsibility of failing to raise the debt ceiling, but the demands never went nearly as far as those made in 2011 by the GOPs. So, while your point is well taken, it is not quite as strong as you think, and I think it best to leave it general.