Obscure clause may help US avert default

US President Barack Obama © AFP/File Mandel Ngan

AFP

WASHINGTON (AFP)  – The White House could resort to a little-known line in the US constitution to prevent a ruinous default if Democrats and Republicans do not agree to raise the debt ceiling by August 2, experts say.

The 143-year-old clause, written to address still-potent divisions after the bloody Civil War, has been dredged up by legal scholars as well as the US Treasury secretary to suggest how a debt debacle might be avoided.

But resorting to it could spark a constitutional crisis over just who — the Congress or the White House — controls the power of the federal purse, analysts say.

The US government reached its debt limit of $14.29 trillion in May and since then the Treasury has used special measures to allow the government to keep paying its bills.

But unless the limit is raised by August 2, the Treasury says, growing spending and debt service commitments will force a default, which would have disastrous ripple effects throughout the global financial system.

Republicans in Congress — which sets the debt cap into law — have refused to raise it unless the move is accompanied by deep spending cuts, and their talks with Democrats have made little visible progress.

If the impasse is not broken, could President Barack Obama simply ignore the ceiling and borrow more money?

Some legal experts believe he could, citing the 14th Amendment to the Constitution, adopted in 1868.

With the country still wrestling with post-war divisions, section four of the amendment was written after politicians from the defeated south sought to block the north’s commitment to repay large debts arising from its victorious campaign.

“The validity of the public debt of the United States, authorized by law … shall not be questioned,” it reads.

Neil Buchanan, a professor at George Washington University Law School, said that means the government’s obligation to make payments cannot be abrogated by some “arbitrary limit.”

“If Congress has enacted laws that create public obligations, then those obligations must be met,” Buchanan wrote in a column on Thursday.

Taken a step farther, some suggest, the law may make the debt ceiling itself unconstitutional.

While some have argued that the constitutional clause was specific to the situation of the time, a 1935 Supreme Court ruling established that it still applies, Buchanan said.

Treasury Secretary Timothy Geithner, who has warned that a default would have “catastrophic” consequences, raised the clause during a discussion of the debt ceiling in May — though he did not say the White House should invoke it if negotiations fail.

If invoked, experts say, it could spark a nasty fight over constitutional powers between the White House and Congress.

Asked about it during his Twitter town hall this week, Obama — a former constitutional law professor — emphasized the need to reach a deal in Congress.

“I don’t think we should even get to the constitutional issue. Congress has a responsibility to make sure we pay our bills,” he said.

Geithner’s mention of the law does not mean he thinks it can be used to ignore the debt cap, the Treasury said Friday in a letter addressed to The New York Times.

“The secretary has cited the 14th amendment… in support of his strong conviction that Congress has an obligation to ensure we are able to honor the obligations of the United States,” a senior lawyer for the department wrote.

© AFP — Published at Activist Post with license