14th Amendment Option: You Can't Demand Ransom If There's No Hostage
I have no doubt at this point that much of the talk about a 14th Amendment to the U.S. Constitution strategy to deal with the debt ceiling impasse is just being used for leverage. After all, we're still a month away from August 2 -- the date the Treasury currently says the finances of the United States will turn into a pumpkin and the country won't have enough cash to pay all its bills -- so there's still plenty of time to work out an agreement.
Because of this, some of the daily developments relating to Section 4 of the 14th Amendment...which until CG&G's Bruce Bartlett raised it back in April has never before been much of a topic of discussion for budgeteers...has to be considered as negotiating rather than just analysis. Nevertheless, some of what's happening is clearly having an impact on current thinking.
Take this discussion of the legislative history of Section 4 by Jack Balkin that was posted yesterday. The whole post is worth reading, but here's the money quote:
...the goal (of Section 4) was to remove threats of default on federal debts from partisan struggle. Reconstruction Republicans feared that Democrats, once admitted to Congress would use their majorities to default on obligations they did disliked politically. More generally, as Wade explained, "every man who has property in the public funds will feel safer when he sees that the national debt is withdrawn from the power of a Congress to repudiate it and placed under the guardianship of the Constitution than he would feel if it were left at loose ends and subject to the varying majorities which may arise in Congress."
Like most inquiries into original understanding, this one does not resolve many of the most interesting questions. What it does suggest is an important structural principle. The threat of defaulting on government obligations is a powerful weapon, especially in a complex, interconnected world economy. Devoted partisans can use it to disrupt government, to roil ordinary politics, to undermine policies they do not like, even to seek political revenge. Section Four was placed in the Constitution to remove this weapon from ordinary politics.
Or take this post by Ryan Grimm and Samuel Haass at the Huff Post that shows that Tim Geithner was thinking about the 14th Amendment over a month ago, and that Geithner absolutely wanted to make sure that others knew about it.
I've been in and around Washington too long to think that all of this is happening by accident. Although I don't have a document that shows this to be the case, if the secretary of the Treasury is talking openly about it, you have to assume that a concerted effort is underway for a while to get the word out about the 14th Amendment.
There were two likely reasons.
First, the White House wants to make sure that invoking the amendment won't be a shock if it is used and that the bond market will be comfortable buying debt issued without specific congressional approval.
Second, the White House clearly wants to show congressional Republicans that their plan to demand ransom for the debt ceiling might well be based on a completely incorrect assumption that they can hold the borrowing limit hostage.