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The Daily Debt-Ceiling Drama

Maybe we should just call it DDD from now on, and save everyone a couple seconds of reading time. In any case, it's the story that just won't go away, especially since not much else is happening in the world of politics.

Yesterday, the National Association of Government Employees (NAGE) filed a lawsuit against Joe Biden and Secretary of the Treasury Janet Yellen. Here is NAGE's argument in its own words:

The Debt Limit Statute is unconstitutional because it puts the President in a quandary to exercise discretion to continue borrowing to pay for the programs which Congress has heretofore duly authorized and for which Congress has appropriated funds or to stop borrowing and to determine which of these programs the President, and not the Congress, will suspend, curtail, or cancel altogether...

Unless and until the Debt Limit Statute is amended or revised to allow Congress to determine the priority of payments among specific programs once the limit is reached, members of Plaintiff NAGE will suffer irreparable injury from layoffs, furloughs, and loss of employment that are taken without any legitimate authority by the President

The first part says the debt limit, as currently constituted, is unconstitutional. And the second part lays out NAGE's standing to ask a court to intervene.

This certainly adds an interesting new wrinkle to the whole situation, doesn't it? It is entirely plausible that the whole game of debt-ceiling chicken could be delayed for weeks or months while this is worked out. That is to say, if a judge agrees to hear the case, that judge could well declare that the debt ceiling is in abeyance until there is a resolution. And if the case goes up the chain to the court of appeals, and then the Supreme Court? Could take a while. Note that venue-shopping is a game that everyone can play, and NAGE has chosen the United States District Court for the District of Massachusetts for this case. That court currently has 11 judges, nine of which are Democratic appointees, and zero of which are Trump appointees. Appeals from that District go to the United States Court of Appeals for the First Circuit, which currently has four Democratic appointees and two open seats waiting for Biden judges.

So, what is NAGE's goal here? One possibility is that the organization is interested in helping the White House out, and creating a potential court-driven solution to the current mess. A second possibility is that they are trying to save their own necks. We'll address that more fully in short order, though for now we'll say that both of these could very well be correct.

When it comes to end-runs around Congress—specifically, the Republican-controlled House, and the Senate with its filibuster—the two options that keep coming up are the $1 trillion coin and invoking the Fourteenth Amendment. These have gotten lots of coverage, including from us (primarily because we think that doing something very bold would be smart politics). That said, quite a few outlets have given the impression that these are the only end-run-type options, and that's simply not the case.

Before we get to alternate approaches (and we will address three of them), let's address why the White House might not be enthused about the high-profile chess moves. The $1 trillion coin(s) would almost certainly be legal, and would be very, very bold. There would even be an opportunity for some primo messaging, by putting, say, Harriet Tubman's face on one side of the coin and, say, Eleanor Roosevelt's on the other. Or maybe Jane Roe's. However, Biden is not exactly known for his flashy, aggressive maneuvering. He is also likely leery of setting a new precedent, and putting this arrow in the next Republican president's quiver ("President DeSantis announces construction of Disneyland alternative; to be funded with $1 trillion coin featuring face of Rep. Matt Gaetz"). Also, even if it was well understood that the expansion of the currency supply was to be temporary, the move would almost certainly roil the markets, and you never know what happens at that point.

As to the Fourteenth Amendment, let us once again reiterate the relevant passage:

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. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

There are some pretty good legal arguments for invoking this portion of the Constitution, but also some pretty good arguments against. As reader J.L. in Chicago pointed out recently, the amendment refers to "debt," not necessarily to spending (on the other hand, if veterans pensions' are a "debt," per the language of the Amendment, then surely so too are entitlements like Social Security and Medicare). Beyond that, as J.L. also pointed out, is that sub-clause "authorized by law." One could argue that when Congress passed the budget, it authorized the spending therein, but one could also argue that when Congress adopted the debt ceiling bill in 1917, it created a mechanism by which that authorization could be withdrawn. The point here is that it would be a messy legal fight that would end up before the Supreme Court, and that Biden could well lose, which would be very bad for him. Oh, and this maneuver would probably also roil the economic sector.

And so, let's move on to three alternatives that are less bold, and so presumably less sexy, but are rather more plausible. We'll list them from most likely to least likely:

It is good news for McCarthy that he got a debt-ceiling bill passed, and that he has the backing of McConnell and most Senate Republicans. But given that Biden has plenty of options for not giving in, but not defaulting either, we think he still very clearly has the upper hand here. (Z)

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