The Vanishing 14th Amendment Case

Democrats are frustrated; that much is clear. They’ve seen the White House kick their House and Senate leaders out of the debt ceiling negotiation room. They see the president hinting at some form of strengthened work requirements, most likely for Temporary Assistance for Needy Families, which could end up the sacrificial lamb in the talks. Even if that gets stricken from the deal amid a left-wing backlash, the “victory” would be only Obama-style spending caps that could be debilitating to the macroeconomy, among other things.

That’s why you see Democrats urging the White House to not play along with this hostage negotiation and take extraordinary action. Eleven senators (Sanders, Smith, Warren, Markey, Merkley, Hirono, Welch, Blumenthal, Reed, Whitehouse, and Fetterman) have now asked Biden to “exercise your authority under the 14th Amendment of the Constitution, which clearly states: ‘the validity of the public debt of the United States … shall not be questioned.’” Initially, there were five senators on that letter. Fetterman issued his own solo statement along similar lines today, as did Warren. Sen. Angus King (I-ME), who is not exactly on the left side of the caucus, also urged a 14th Amendment option. “I think there’s some very strong legal arguments. The 14th Amendment is pretty explicit,” he told Semafor.

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Let’s face it: The administration is cool to this idea. I’ve heard a couple opinions as to why. But the big one is that invoking the 14th Amendment action would lead to a court battle, and the same financial chaos from a default would then happen, only with a shift in the blame game, with the White House being accused of taking a legally risky long shot with the U.S. economy in the balance.

The thing is, the 14th Amendment option is in court, right now. There’s a complaint and a docket and everything. If that case could be decided ahead of time, there would be no legal chaos. But the plaintiffs in that case appear to have neglected to file in such a way that would lead to rapid action, which some have called a form of legal malpractice.

Let’s look at what White House officials are saying about the 14th Amendment option. Their first rebuttal is bizarre: Apparently, some people in the White House have said that the 14th Amendment only lets the executive make debt payments, and not other ones. The example given was that it wouldn’t help with Social Security payments.

First of all, that’s a terrible example. Social Security is an off-budget vehicle with a dedicated, weekly funding source that is not at all tied to the debt ceiling. There is even surplus cash, legally required to go to Social Security, sitting in a trust fund in the form of bonds. “The money from the designated tax would presumably not be at issue,” said economist Dean Baker. “With the bonds, it seems the 14th Amendment absolutely would say that the money would be paid.” In addition, a 1996 law allows the government to pay down the Medicare and Social Security trust funds until the debt ceiling is increased.

Because the Treasury sends the actual payments, the only issue might be if their staff is furloughed and nobody can run the computers, though much of the functions of those payments are automatic.

Second, arguing that Social Security was just used as a (poor) example of how the 14th Amendment only protects debt service and not all the other payments depends on a tortured reading of the word “public debt,” Baker said. “Arguably every legal commitment to spend creates a debt. For example, if a payment is due to a military contractor, that is a debt. Certainly, that is how it is seen in bankruptcy law.” Also, the whole point of the 14th Amendment idea is that if public debt must be repaid, then the president can keep borrowing and repay that debt. Therefore, money would be available for other obligations.

The White House is not a monolith, but a place where thousands of people work, and there are lots of opinions, not just one. So it’s probably best to just take the words of the president himself. Last week, he said that, while he was considering the 14th Amendment, “the problem is it would have to be litigated. And in the meantime, without an extension, it would still end up in the same place.”

In other words, if the president, faced with the impossible task of violating the Constitution or violating federal law, sides with the Constitution, and invokes the 14th, then conservative groups sue him over doing so, running to their pet courts in Texas to get an injunction, and we hit the debt ceiling anyway, with all the attendant chaos. I’ve heard arguments that this would at least partially exempt House Republicans in the post-default blame game.

It would be good, then, if there were already a case working through the courts, arguing that the debt ceiling statute is unconstitutional because, when reached, it forces the president to break the law. Fortunately, there is just such a case, and it was filed on May 8.

I wrote last week that the National Association of Government Employees, which is affiliated with SEIU, filed that case, arguing that their members were at risk of being furloughed or fired if the debt ceiling was hit. There are arguments as to whether, because the government might have other options (minting a trillion-dollar coin, or selling “premium bonds” with no face value), the debt ceiling statute truly creates this dilemma on the executive branch.

But it would be good to know that answer now! That way, the legal murkiness would be lifted, and everyone could have a sense of the options. The quickest way to do this would be for NAGE to seek a temporary restraining order or preliminary injunction. That would force Judge Richard G. Stearns to take rapid action, which is necessary, with the debt ceiling just days away from being reached.

Inexplicably, the plaintiffs did not file a motion for a TRO or preliminary injunction. As a result, this case—which could clear up the legal quagmire that Biden says is preventing him from invoking the 14th Amendment—has seen no action in the week and a half since it’s been filed, with less than two weeks to go until the X-date.

I asked Thomas Geoghegan, one of the attorneys in the case, why they didn’t file for fast-moving relief. “As a general rule our firm does not comment on ongoing cases in which we are counsel,” he responded.

Maybe NAGE doesn’t think it could win such a case until the debt limit was hit; anticipatory rulings aren’t often the judiciary’s thing. But there is real chaos going on in financial markets right now as a result of the failure to raise the debt ceiling. One-month Treasury bill yields have skyrocketed; anyone trying to trade that bond will have to give up more for it, causing a real financial loss.

That’s why I’ve felt that a government bondholder is a better plaintiff for this case. But NAGE could have simply become a government bondholder by purchasing a one-month Treasury bill. That would have generated the current financial loss. This path was also not taken.

It was initially promising that someone was thinking ahead enough to file a case that would force a decision on the 14th Amendment and the constitutionality of the debt ceiling statute before the looming X-date. But by failing to do so properly, the case has become far less relevant. That’s a shame, because it’s taken an arrow out of the quiver of a president who has put himself in a terrible negotiating stance.

However, there’s one last thing to consider: The defendant in NAGE’s case is actually the president, along with Treasury Secretary Janet Yellen. They have not responded to the complaint. If this were a president who wanted to eliminate the legal uncertainty around the 14th Amendment, he could use the opportunity to file his own opinion that the debt ceiling is unconstitutional, and offer no defense at all.

At any rate, some response would be satisfying. The clock is ticking.