US Government Debt Different - Finance Department - University of ...

300The 2011 Debt Limit Impasse: Treasury’s Actions & The Counterfactual – What Might Have Happened if the National Debt Hit the Statutory LimitTheory 3: The President Can Ignore the Debt LimitSeveral legal mechanisms exist to justify further borrowing in excessof the debt limit.A. The Debt Limit is UnconstitutionalThe constraints of the Public Debt Clause may require the Presidentto breach the debt limit. The President may argue that the debtlimit is unconstitutional because it “question[s]” the “validity ofthe public debt” either (1) on its face because its existence makesdefault possible; or (2) at the point that the national debt hits thestatutory limit because the debt limit prevents further borrowing tosatisfy statutory obligations. 289 Alternatively, the President may arguethat a strategy of threatening to refuse to extend the debt limit isunconstitutional. 290The argument for the unconstitutionality of the debt limit depends onan interpretation of “questioned” that is broader than “repudiation”and inclusive of either “default” or acts that jeopardize 291 the “validityMedicare payments to beneficiaries. Thus, Social Security and Medicare trust funds wouldbe depleted by the amount needed for beneficiary payments, as would the outstanding debtsubject to the limit. Treasury could then use the additional “headroom” to borrow the correspondingamount to pay beneficiaries. This would increase the percentage of general expensesthat could be paid using inflows.289See supra Section II.A.2 – The Fourteenth Amendment.290See Jack Balkin, Secretary Geithner understands the Constitution: The Republicans are violatingthe Fourteenth Amendment, Balkinization, July 8, 2011, http://balkin.blogspot.com/2011/07/secretary-geithner-understands.html. During the debt limit impasse in 2011,Professor Balkin argued that the “strategy of congressional leaders in the Republican Partyviolates the Constitution because they are threatening to take us over a cliff in order to pushtheir radical policy agenda.” Professor Balkin suggested that the argument against the constitutionalityof the threat could be a political boon for the President and a means of applyingpressure on Congress to extend the debt limit without further threats. However, he warnedthat the constitutional argument must be made early and often, and a failure to clarify thispoint may “virtually guarantee[] that this same hostage taking strategy will be used repeatedlywhenever a House of Congress controlled by one party wants to stick it to a White Housecontrolled by the other.” Professor Balkin substantiates his point by referring to Senator Wade’sspeech about his proposed amendment, see infra Appendix C, to demonstrate that the purposeof the Public Debt Clause was to “remove threats of default on federal debts from partisanstruggles.” Jack Balkin, The Legislative History of Section Four of the Fourteenth Amendment,Balkinization, June 30, 2011, http://balkin.blogspot.com/2011/06/legislative-history-ofsection-four-of.html.291See Abramowicz, supra note 103, at 24.