{"id":7475,"date":"2023-05-11T18:11:22","date_gmt":"2023-05-11T22:11:22","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/six-legal-reasons-the-federal-budget-is-its-own-debt-ceiling\/"},"modified":"2023-05-11T18:11:23","modified_gmt":"2023-05-11T22:11:23","slug":"six-legal-reasons-the-federal-budget-is-its-own-debt-ceiling","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=7475","title":{"rendered":"Six Legal Reasons the Federal Budget Is Its Own \u2018Debt Ceiling\u2019"},"content":{"rendered":"
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Writing in outrage for over a decade about the illegality of the putative \u2018debt ceiling as I, along with several distinguished colleagues, have been doing, I am not a little relieved to see some of our longstanding arguments gaining traction<\/a>. I am a little bit troubled, however, by how attention has centered almost solely upon the 14th<\/sup> Amendment to the U.S. Constitution.<\/p>\n

The 14th<\/sup> Amendment is, to be sure, one of the grounds upon which the \u2018debt ceiling\u2019 must be declared null and void \u2013 for reasons even beyond those we\u2019re hearing right now, as I\u2019ll indicate. But there are at least five additional<\/em> such grounds. It might then be helpful to elaborate them, along with their mutual complementarities, in summary fashion.<\/p>\n

Let\u2019s start with the constitutional and legislative backdrop …<\/p>\n

Articles I and II of the Constitution vest both Congress and the President with budgetary roles. All spending and revenue-raising must be legislated, and valid legislation must be passed by both chambers of Congress and signed into law by the President. Final budgets, such as they are, are accordingly joint Congressional and Presidential products \u2013 save in such rare circumstances as those in which Congress overrides a Presidential veto with a supermajority vote.<\/p>\n

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The Constitutional provisions that I have just channeled are broadly worded and prescribe very little as to the details<\/em> of federal budget processes. These are determined, instead, by more legislation. In 1921, through the Budget & Accounting Act, Congress vested primary budget formulation responsibility with the President, establishing both detailed timetables and the predecessor of today\u2019s Office of Management and Budget (OMB) to help shepherd the process along.<\/p>\n

The \u2018debt ceiling\u2019 is rooted in this era, during which Congress relinquished its previous role as legislator of every distinct federal bond-issuance. This Congress did to afford the President \u2013 by their own law our primary budget-formulator \u2013 more flexibility in determining revenue sources for funding the growing variety of legislated programs. That\u2019s right, the original \u2018ceiling\u2019 was about affording the President more<\/em> discretion, not less.<\/p>\n

It is no accident that the Liberty Bond Act of 1917 (original source of the \u2018ceiling\u2019), the 1913 vintage 16th<\/sup> Amendment to the Constitution authorizing the federal income tax, the thereby enabled Revenue Act of 1913, the Federal Reserve Act of 1913, and the aforementioned Budget & Accounting Act of 1921 all came in rapid succession. In effect, these enactments, all passed by Congress and signed into law by the President, constituted one coherent federal budget regime.<\/p>\n

All of this changed, however, in 1974. The \u2018crisis\u2019 that occasioned the change was brought on, like so many others of the era, by President Richard Nixon. Nixon had an unfortunate tendency to think himself more \u2018imperial\u2019 than the Constitution allowed, and took it upon himself to decide with unprecedented frequency what Congressionally legislated and funded programs, even though he had signed them into law in the first place, were worthy of actual execution and funding.<\/p>\n

The practice in which he manifested this proclivity was known as \u2018impoundment.\u2019 The idea was that instead of spending what Congress had instructed him to spend and what he had agreed, by signing their legislation, to spend, Nixon was routinely spending only what he wished<\/em> to spend, while \u2018impounding\u2019 the rest \u2013 in effect, holding it hostage.<\/p>\n

Congress put an end to this chicanery by passing the Congressional Budget and Impoundment Control Act of 1974, pursuant to which both<\/em> Congress and<\/em> the President go through detailed procedural steps in formulating their own budgets, which budgets are then \u2018reconciled\u2019 and collated before being legislated into law piecemeal through sundry program authorization and appropriations acts passed by Congress and signed by the President. (The Supreme Court closed all plausible loopholes in the Act in Train v. City of New York one year later.)<\/p>\n

This is also the origin of the Congressional Budget Office (CBO), designed as a counterpart to the President\u2019s OMB. In effect, then, what we have had for the past 50 years is an altogether new budget regime superseding the regime put in place 50 years before then. The earlier regime, in other words \u2013 including its \u2018debt ceiling\u2019 component \u2013 was implicitly repealed by the later regime.<\/p>\n

You can see this by noting the logic \u2013 or shall we say the arithmetic \u2013 of the post-1974 regime. Pursuant to that regime the duly legislated federal budget first determines both revenue and spending, then assigns the President and his Treasury Department the task of filling any gaps between the former and the latter through debt issuance. And, since the President is prohibited under this regime from not<\/em> spending what the budget mandates he spend, the regime effectively mandates<\/em> that he borrow any time mandated spending<\/em> exceeds mandated revenue<\/em>.<\/p>\n

We are now situated to see why the 1917 \u2018debt ceiling\u2019 as presently wielded like an AR-15 by a rump faction of the House Republican Caucus is actually no more than a leaky water pistol. For there is literally no way for the President to comply with the putative \u2018ceiling\u2019 as thus applied that does not entail his violating the federal budget itself as formulated pursuant to the 1974 regime that superseded the early 20th<\/sup> century regime. Here are the six reasons why\u2026<\/p>\n

Reason 1. The \u2018Take Care\u2019 Clause<\/em>:<\/em> Article II, Section 3 of our Constitution requires that the President \u2018take care that the Laws be faithfully executed.\u2019 President Nixon effectively violated this provision by not spending as Congress, through that law which is the federal budget, mandated that he spend. President Biden would be doing the same were he not to spend as the last federal budget requires that he spend, and were he not to borrow in so doing as that budget arithmetically mandates that he borrow.<\/p>\n

Reason 2. The \u2018Presentment\u2019 Clause<\/em>, a.k.a. \u2018Line-Item-Veto\u2019 prohibition:<\/em> Article I, Section 7 of our Constitution requires that bills passed by both chambers of Congress be \u2018presented\u2019 as wholes to the President, which the latter then signs into law or vetoes. In Clinton v. City of New York<\/em> (1998), our Supreme Court held that the Line Item Veto Act of 1996 violated this clause by purporting to permit the President to \u2018cherry-pick\u2019 which budget items would become law and which ones would be left on the cutting room floor.<\/p>\n

Were President Biden to \u2018prioritize\u2019 payments mandated by the current federal budget as the aforementioned rump faction of the House Republican Caucus suggests, he would be doing precisely what the Court held that President Clinton couldn\u2019t do and that Congress could not authorize.<\/p>\n

Reason 3. The 14<\/em>th<\/em><\/sup> Amendment<\/em>:<\/em> Article XIV, Section 4 of our Constitution provides that \u2018[t]he validity of the public debt of the United States, authorized by law… shall not be questioned.\u2019 The framers\u2019 intention in enacting this Constitutional provision is of particular interest right now. The self-styled \u2018Confederate States of America,\u2019 controlled by slave owners, had pulled their members from Congress and endeavored to destroy our federal union \u2018from without\u2019 by launching military attacks upon Fort Sumter and other federal installations in 1861. President Lincoln and Congress incurred unprecedented federal debt (multiplying it 80-fold, from a bit over 64 million to 5.2 billion), in the form of Treasury securities sold to millions of patriotic Americans, in financing the successful effort to end that rebellion.<\/p>\n

As the nation began healing at the Civil War\u2019s end, concerns grew that Southern legislators readmitted to Congress would continue their effort to destroy our federal union, save now from within<\/em>, by repudiating the war-occasioned federal debt that American statespersons since Alexander Hamilton had recognized as the essential financial binding agent holding our union together. Indeed, Southern legislators were quite open about their intentions on this score, which is precisely what occasioned the requirement that Southern states ratify the 14th<\/sup> Amendment as a condition of rejoining the Union rather than remaining militarily occupied conquered territories.<\/p>\n

The applicability of the 14th<\/sup> Amendment to the present \u2018debt ceiling\u2019 insanity grows quite clear when we recall this history. It is a striking fact both <\/em>that the aforementioned rump faction of the House Republican Caucus nearly all hail from former Confederate or Confederate-border states, and<\/em> that many of them have called for a \u2018national divorce\u2019 while routinely speaking like, meeting with, or endorsing white supremacists. It is equally striking that most of these Jim Crow Republicans have been transparent about their aims in most current controversies to sow chaos and thereby pave the way for a Weimar style anti-constitutional putsch by their criminal ringleader and serial bankrupt in Mar-a-Lago, Florida \u2013 who has himself now explicitly called for default on the national debt.<\/p>\n

Reason 4. The \u2018Later in Time\u2019 Rule<\/em>:<\/em> It is a well established judicial canon of statutory construction that when an old law appears to conflict with a newer law or treaty, the older law must either be interpreted in a manner that does not conflict with the newer law, or be treated as having been implicitly repealed by the newer law. There are two ways in which this canon is applicable to our present \u2018debt ceiling\u2019 imbroglio.<\/p>\n

First, the 1974 budget regime clearly displaces the earlier regime, including its \u2018debt ceiling.\u2019 This is made dramatically clear in the 1974 regime\u2019s requiring both that the President execute the budget in full (no impoundments), and that s\/he issue debt in so doing to fill any gap between spending and revenue. And second, any current budget enacted later in time than the last \u2018debt ceiling\u2019 hike of course supersedes the latter.<\/p>\n

It is for this reason that I\u2019ve often written that \u2018the budget is its own \u201cdebt ceiling<\/em>.\u201d\u2019 Indeed, in light of the anti-impoundment content of the 1974 Act, it is clear that the budget is both<\/em> its own floor and<\/em> its own ceiling. It is self-contained. It is the be all and end all of federal budgeting. It is the entirety of the law governing spending, taxing, and borrowing, with no role left to be played by the old 1917 Liberty Bond Act \u2018ceiling.\u2019<\/p>\n

Reason 5. The \u2018Absurd Result\u2019 Canon<\/em>:<\/em> It is also a well established canon of statutory construction that, when a legal provision \u2013 either as written or as it would be applied \u2013 can be construed in more than one way and one such way would yield a result so absurd that the legislature cannot plausibly be taken to have intended it, the interpretation yielding that result must be considered mistaken.<\/p>\n

In the present context, it is clear that the interpretation of the \u2018debt ceiling\u2019 proffered by the aforementioned rump faction of the Republican House Caucus would yield multiple absurdities of the relevant sort. It would require the President to violate contract obligations (which US borrowings assuredly are), the last-legislated federal budget of 2022, the 1974 Congressional Budget and Impoundment Control Act, and one or more of the three Constitutional provisions assayed above.<\/p>\n

And that is to say nothing of the cataclysm that default on our national debt, which we\u2019ve never reneged on before, would bring to the US dollar, to US debt servicing costs, to the US banking and financial sectors, to the nation\u2019s pension and mutual fund holders, to the nation\u2019s inflation rate and its broader economy, and indeed to the world\u2019s capital markets and trading economy.<\/p>\n

It is simply impossible to imagine the framers of the Liberty Bond Act of 1917 \u2013 who were seeking to facilitate<\/em> the finance of the First World War effort \u2013 or indeed any member of Congress prior to the aforementioned rump faction of the House Republican Caucus, ever having intended even one of these outcomes, let alone all of them.<\/p>\n

Reason 6. The \u2018Constitutional Avoidance\u2019 Doctrine<\/em>:<\/em> Finally, it is also a well established canon of statutory construction that, when a legal provision \u2013 either as written or as it would be applied \u2013 can be construed in more than one way and one such way would raise a Constitutional issue, the interpretation yielding that result should if possible be considered mistaken.<\/p>\n

The applicability of this doctrine to the present imbroglio is, like those of the previous legal doctrines, quite clear as well. The \u2018debt ceiling\u2019 as interpreted by today\u2019s Jim Crow Republicans would squarely conflict with the 14th<\/sup> Amendment as noted above. Either the interpretation, then, or the \u2018ceiling\u2019 itself must be deemed without legal force.<\/p>\n

I hope that the point is now made. Neither the President, nor the Treasury Secretary, nor any responsible member of Congress need worry that there would be anything \u2018legally questionable\u2019 about either or both Congress\u2019s and the President\u2019s simply disregarding the \u2018debt ceiling\u2019 and continuing to make good on the nation\u2019s legal obligations as always. No court would find otherwise.<\/p>\n

There simply is no uncertainty here. Indeed, the law quite clearly, quite certainly and quite squarely requires one thing. It requires<\/em> that Congress and the President alike recognize that the old 1917 relic known as the \u2018debt ceiling\u2019 as presently applied is null and void, and has been so both since its inception and especially since Congress smacked down the would-be \u2018imperial\u2019 President Nixon a half-century ago.<\/p>\n<\/div>\n