The US Debt Crisis and a “Constitutional Escape Hatch?”

With the United States government locked in a power struggle between the Democrats and the Republicans, former President Bill Clinton swooped in and offered a somewhat curious solution to the American debt problem last week. Termed a “constitutional escape hatch” by the New York Times’ legal correspondent, Adam Liptak, it would be invoked in the event that no agreement can be reached between the President and Congress when the government has hit its borrowing limit. This may be a last-ditch effort to stave off a default and consequently a collapse of the American and world economies.

The Backstory:

It started with Greece. The world held its breath as other European countries poured billions of Euros into Greece in an effort to bail out the country – out of bankruptcy, essentially. Now, the United States of America, the bastion of capitalism, is facing its own debt crisis. The total public debt is somewhere in the tune of over $14 trillion dollars, which amounts to more than 90% of its GDP (Gross Domestic Product) last year.

The word “default” and “debt ceiling” have found its way on almost every news headline these past two weeks. August 2, 2011 is the deadline for the United States to raise its debt ceiling, which is currently at $14.30 trillion dollars, or else risk defaulting for the first time in its history. A default would mean that America would no longer be able to pay its bills, thereby reneging on domestic commitments (e.g. Medicare) as well as international commitments (e.g. NATO missions).

Throughout the month of July, eyes were fixed on President Barack Obama and Congress to see whether a solution could be reached to tackle the problem. As of today, July 26, 2011, Congress seems to be at a gridlock, as the Democrats control the Senate while the Republicans control the House of Representatives, and neither side is willing to budge. Last Thursday and this past weekend, President Obama came close to reaching a compromise with House Republican leader, John Boehner. Termed the “grand bargain,” this package would have cut federal government spending and raised taxes, chipping away $3 trillion dollars from America’s debt. This “grand bargain,” however, fell through in the last minute; Boehner walked away primarily due to the issue of increasing taxes for wealthy individuals and corporations, which the Tea Party members of his party would have adamantly opposed.

Now, President Obama has been relegated to the sidelines. The Democrats and Republicans are putting together two different deficit reduction proposals. The Democrats, lead by Senator Henry Reid, are focused on cutting $2.7 trillion dollars in government spending, while preserving entitlement programs and not raising taxes. This plan would be long-term. The Republicans, on the other hand, are cobbling together a plan that would include $1.1 trillion dollars in short-term cuts. The Democrats and President Obama have vowed to oppose any short-term agreements.

The 14^th Amendment

The former President, who, like the current President, taught the Constitution in law school, cites the 14^th Amendment as a way to raise the debt ceiling and “force the courts to stop me.” Clinton added that he would unilaterally use it “without hesitation.” Section 4 of the 14^th Amendment is read by the former President and others as bestowing additional powers on the president, at least temporarily. They believe that the 14^th Amendment compels Congress to fund the debt that results from their appropriations. Thus, the president has the power to raise the debt ceiling. Not all scholars share this belief.  In fact, Obama, having “talked to [his] lawyers,” is not convinced that this is a winning argument.

Section 4 of the 14^th Amendment reads: “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.”

“The validity of public debt… shall not be questioned” is the most contentious sentence from the section.

Applicability of Section 4

The first question that needs to be asked is if and how Section 4 of the Amendment applies to the issue at hand. The historical context of the 14^th Amendment is the end of the Civil War; it put into place assurances that debts to the Union would be repaid and debts to the Confederation disavowed.

Because it was written in broader terms, does that mean that the section can be taken out of its historical context? Jack M. Balkin, a legal scholar from Yale Law School, would answer affirmatively: “You’re not supposed to hold the validity of the public debt hostage to achieve political ends.” He does note at the end, though, that Section 4 should only be used when everything else has been exhausted.

Further, in Perry v. United States, a Supreme Court case from 1935, Chief Justice Evans Hughes stated that the “language” of the section in question “indicates a broader connotation.”

Taking the battle from Congress to Court?

Yet, there are convincing arguments that can be made as to how this constitutional option is undesirable within a larger picture. First, with the government fractured, and the President acting alone, it is uncertain whether the nation’s creditors would continue to lend money to the United States.

Related, a unilateral move like this would alienate Republicans and more conservative Democrats even more. Campaigning on a platform that included bipartisanship and working together for change, President Obama would not likely support this constitutional option, especially with the 2012 elections coming up.

Another reason why President Obama quickly dismissed this “constitutional escape hatch” is the prospect of a drawn out court battle. The White House would not want the government to be embroiled in lengthy, and messy, litigation.

Moreover, the issue at hand is mainly a political issue, not a legal issue. The courts would shirk from deciding this kind of issue. As Balkin declares, “It’s the president’s duty to save the Republic.”