Mike Konczal: Bernanke Upside Down
Shame on the Cato Institute for Promoting the Mendacious Michael Cannon

Bruce Bartlett Says the Debt Ceiling Is a Dead Letter


The Debt Limit Option President Obama Can Use: [T]he debt limit is statutory law, which is trumped by the Constitution which has a little known provision that relates to this issue. Section 4 of the 14th Amendment says, “The validity of the public debt of the United States…shall not be questioned.” This could easily justify the sort of extraordinary presidential action to avoid default that I am suggesting.

Some will raise a concern that potential buyers of Treasury securities may be scared off by a fear that bonds sold over the debt limit may not be backed by the full faith and credit of the United States. However, given that the vast bulk of Treasury securities are 3-month bills that will turn over many, many times before this issue ever reaches the Supreme Court, it is doubtful than anyone will be concerned about that. And the Federal Reserve could assure investors that it will always be a buyer for such securities.

People smarter than I am tell me that the Treasury has an almost infinite ability to avoid a debt crisis. I hope they are right. But I am hypothesizing a situation in which the Treasury reaches the end of its rope and a day comes when it needs $X billion to pay interest and it has less than $X billion in cash. Under those circumstances, when default is the only possible alternative, I believe that the president and the Treasury secretary would be justified in taking extraordinary action to prevent it, even if it means violating the debt limit...

Bruce is right. At least, Bruce is right in the sense that lawyers could argue and five Supreme Court justices could with a straight face affirm that the Treasury Secretary's duty to ensure that the validity of the public debt not be questioned overwhelms his duty not to sell bonds in excess of the debt ceiling.

Whether five justices would so rule--that is pure politics.