Why Biden should end the debt limit farce once and for all

We shouldn’t be surprised that President Biden’s May 9 meeting with congressional leaders produced nothing: to win the speakership on the 15th ballot, Majority Leader Kevin McCarthy (R-Calif.) granted the Freedom Caucus a veto over any deal, and that far-right group has made clear it will not settle for anything short of a radical transformation of this country’s governance. A national default and almost certain global recession would be preferable to enactment of anything like the bizarre legislation the House passed by a single vote. But Biden has a far better choice: eliminating the debt limit’s threat once and for all.

The debt limit has haunted American politics for so long that many people have come to accept it as something normal or inevitable. It is not. No other advanced country has a debt limit that brings it periodically to the brink of default. And Section 4 of the 14th Amendment states that “The validity of the public debt of the United States, authorized by law … shall not be questioned,” which bars any law from interfering with the Treasury’s ability to make payments Congress has authorized. 

Nor are negotiations over the debt limit the least bit normal. For starters, they never occur when Republicans control the White House. Democratic leaders insist that a default is contrary to the national interest and vote for unconditional debt limit increases even when the added debt came from Republican legislation that they had opposed. President Trump said “I can’t imagine anybody using the debt ceiling as a negotiating wedge.” But when a Democrat is president, Republicans start making demands.

Even more remarkably, unlike any normal kind of negotiations, debt limit deals do not involve the parties trading things that each other wants. Republicans do not claim to want a default; they instead demand sweeping concessions to vote for something they say they support. This bears no resemblance to Democrats trading spending cuts for Republicans’ agreement to upper-income tax increases or COVID-19 relief deals where Republicans accepted expanded unemployment compensation in exchange for wide-ranging business subsidies.

In normal negotiations, each side stops when the price of additional concessions from the other side exceeds those concessions’ value. Because Republicans are not offering any concessions to the Democrats’ policy program but merely agreeing to forego forcing an economic calamity, they have no reason to moderate their demands.

And even if President Biden folds, the same kind of extortion will be back next year, because House Republicans are offering only a modest increase in the debt limit. By forcing an immediate one-third cut in annual appropriations outside defense and veterans’ health care — virtually guaranteeing a serious recession — and terminating Medicaid and food assistance to the unemployed, the House GOP bill could harm the economy even more than a default would.

This crisis is entirely artificial. The federal deficit has been falling dramatically. Markets show no worry about the deficit: investors happily buy Treasury bonds at near-historically low interest rates.

Indeed, House Republicans do not take their own rhetoric about the deficit seriously. Their debt limit legislation includes a provision that would increase the deficit $120 billion by reducing enforcement efforts against upper-income tax cheats. And they are preparing expensive legislation to expand business tax breaks.

If the nation reaches the debt limit, Biden cannot simply stop paying our bills. The Impoundment Control Act prevents him from withholding money Congress has appropriated. Nothing empowers him to disregard the Impoundment Control Act in favor of the debt limit.

The solution is not to submit to the narrow, extremist House Republican majority’s extortion and fundamentally change the nation’s governance. Instead, Biden should declare the debt limit ineffective for violating Section 4 of the 14th Amendment. The Constitution requires that the president “take Care that the Laws be faithfully executed,” an obligation he would violate if he breached the Impoundment Control Act.

Biden also has several statutory ways around the debt limit. The Impoundment Control Act is one. Another is explicit authorization to mint coins sufficient to pay the nation’s debts. Secretary Yellen has called this a “gimmick,” but no more so than the “extraordinary measures” Treasury secretaries of both parties routinely undertake when the nation approaches the debt limit. And, indeed, the debt limit itself is the ultimate gimmick: Republicans will have plenty of opportunity in September to demand reductions in new spending as part of the regular budget process; they do not need to threaten not to pay the bills for spending Congress has already approved. Using one gimmick to prevent another gimmick from wrecking the economy would be nothing to regret.

David A. Super is a professor of law at Georgetown Law. He also served for several years as the general counsel for the Center on Budget and Policy Priorities. Follow him on Twitter @DavidASuper1