At a lunch roundtable with columnists earlier today, House Minority Leader Nancy Pelosi urged President Barack Obama to avoid a new debt-ceiling showdown by stating that a statutory borrowing limit is inconsistent with Section 4 of the 14th Amendment, which states that “the validity of the public debt of the United States … shall not be questioned.”
She at first referred to this possibility obliquely while making a larger point about the lack of cooperative spirit between the Republican Party and the Obama administration but clarified her stance in response to further questions saying, “I would like to see the Constitution used to protect the country’s full faith and credit.” She didn’t offer a legal argument in favor of the position but argued on policy grounds that “you cannot put the country through the uncertainty” again, noting that America’s sovereign debt was downgraded by ratings agencies in the wake of the standoff even though it was successfully resolved.
“This isn’t just about credit ratings,” she said, “it’s about the dynamism of our economy.”
Speaking last summer, former President Bill Clinton also endorsed this approach and anonymous members of Congress alleged that Pelosi privately supported it. Obama, however, has indicated that his administration’s lawyers are not persuaded the constitutional argument is correct. In my experience discussing this with constitutional scholars, the key point is less about the merits of the argument per se than it is about whether there’s anything the courts could or would do to prevent a president from acting unilaterally in this regard. Most people I’ve spoken to feel that this would be a classic nonjusticiable political question and no court would issue a restraining order enjoining the Treasury Department from issuing additional debt.
On policy grounds, Pelosi’s argument that the debt-ceiling fight was damaging to the real economy isn’t totally ironclad since the country hasn’t had enough such fights to do a definitive test. But the evidence is fairly persuasive to me and includes the perfectly timed slowdown in the job market and the otherwise inexplicable collapse in consumer confidence. I know that Treasury Department officials, not normally the most left-wing branch of the Obama administration, also agree that a rerun of the fight would be economically harmful regardless of the actual outcome. Last time around Pelosi was dismissive of the idea that Obama would avail himself of this option, but at lunch today she declined to speculate as to whether the president sees eye-to-eye with her on this matter.
An alternative strategy thatsounds much more ridiculous but is arguably on firmer legal footing refers to 31 USC § 5112 - Denominations, specifications, and design of coins.
Section (k) of this statute states that the secretary of the Treasury “may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary’s discretion, may prescribe from time to time.” The intention here is to have the mint make a small number of platinum collector coins as a minor giveaway to platinum interests. But the plain text of the law appears to indicate that Secretary Geithner can mint a $2 trillion platinum coin, give it to the Federal Reserve, and then use that deposit as the backing to finance government operations.