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Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

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Speaker 2: Is imposing the fourteenth Amendment a perfect solution? No it

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Speaker 2: is not, but using the fourteenth Amendment would allow the

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Speaker 2: United States to continue to pay its bills on time

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Speaker 2: and without delay, prevent an economic catastrophe.

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Speaker 1: With no sign of a debt limit deal in sight,

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Speaker 1: some progressive Democrats, like Senator Bernie Sanders are urging President

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Speaker 1: Biden to invoke the fourteenth Amendment to go around Congress

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Speaker 1: to pay off the nation's debts. Biden believes he has

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Speaker 1: the legal right to do that, but doesn't necessarily know

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Speaker 1: if he has the time because of the expected legal challenges.

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Speaker 2: I'm looking at the fourteenth Amendment whether or not we

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Speaker 2: have the authority. I think we have the authority. The

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Speaker 2: question is could it be done and invoked in time?

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Speaker 1: Joining me is Michael Dorf, a professor at Cornell Law

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Speaker 1: School who's been studying and writing about this issue for

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Speaker 1: some twelve years. So the White House has appeared to

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Speaker 1: rule out invoking the fourteenth Amendment, even though President Biden

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Speaker 1: said this week that he believes he has the legal

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Speaker 1: right to invoke it. So tell us what the argument

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Speaker 1: is there? For the Fourteenth Amendment.

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Speaker 3: So Section four of the Fourteenth Amendment says that the

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Speaker 3: validity of the public debt of the United States shall

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Speaker 3: not be questioned. And it was adopted in eighteen sixty

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Speaker 3: eight in response to the fear that representatives of the

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Speaker 3: states of the former Confederacy in Congress might not pay

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Speaker 3: for the Union side debts from the Civil War. But

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Speaker 3: the language is much clearly broader than simply Civil War debts,

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Speaker 3: and so it is taken by everybody to be a

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Speaker 3: general statement of the proposition that the federal government should

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Speaker 3: pay its debts. There is debate over or what counts

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Speaker 3: as part of the public debt. Does that mean, as

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Speaker 3: some people say, only principle and interest payments on bonds,

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Speaker 3: or does it mean, as simplical say, in the other direction,

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Speaker 3: everything that the government has agreed to pay. So that includes,

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Speaker 3: of course bond principle and interest, but also paying creditors

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Speaker 3: for services rendered, such as hospitals and doctors who perform

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Speaker 3: medical services pursued to medicare social security recipients who are

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Speaker 3: owed the money by virtue of entitlement legislation, and so forth.

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Speaker 3: So that's the question, and the theory is that if

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Speaker 3: the government is unable to pay all of its bills,

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Speaker 3: then that is either a default, or even if not

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Speaker 3: a default, it calls into question the validity of the

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Speaker 3: public debt. So some people argue, and I think this

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Speaker 3: is a pretty plausible argument, that if the government fails

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Speaker 3: to raise the debt feeling and can't come up with

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Speaker 3: the money to pay all of its bills some other

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Speaker 3: way by taxes or selling property or what have you,

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Speaker 3: then that would violate the fourteenth Amendment. And under those circumstances,

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Speaker 3: the debt sealing statute would be unconstitutional. And so the president,

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Speaker 3: by so called invoking that would be saying, well, if

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Speaker 3: the debt stealing statute is unconstitutional, we do what we

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Speaker 3: do with any unconstituted statute. We put it aside. And

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Speaker 3: then there are other statutory provisions that authorize the government

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Speaker 3: to borrow so much money as is necessary to pay

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Speaker 3: the government's bills. So that's the theory behind invoking the

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Speaker 3: fourteenth Amendment. And as I say, it's pretty good. What

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Speaker 3: President Biden expressed a worry about is that, as he said,

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Speaker 3: it would have to be litigated. Now I don't think

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Speaker 3: that's literally accurate. It wouldn't have to be litigated, but

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Speaker 3: it almost certainly would be litigated. So, as a practical matter,

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Speaker 3: his concern is legitimate people would sue. Possibly House Republicans

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Speaker 3: would sue. You could imagine investors in pension funds and

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Speaker 3: the like suing to stop the funds from purchasing bonds

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Speaker 3: of questionable legality, and so there would be litigation, and

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Speaker 3: that would mean that there would be uncertainty about the

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Speaker 3: new debt that had been issued. At the very least,

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Speaker 3: there would be an interest premium that the government would

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Speaker 3: have to offer investors to accept bonds that might not

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Speaker 3: later be declared valid.

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Speaker 1: Has this been tested in the courts at all? Barack

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Speaker 1: Obama also rejected this option during the twenty eleven debt

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Speaker 1: sealing crisis. Why are presidents so reluctant to.

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Speaker 3: Use this well, precisely because it hasn't been tested in

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Speaker 3: the courts. The way that our legal system works is

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Speaker 3: you can't get into federal court just to ask a question.

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Speaker 3: You can do that in some state court systems. There

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Speaker 3: are many other countries in which you can do that.

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Speaker 3: You can get a so called advisory opinion from a

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Speaker 3: constitutional court. Until relatively recently that was the only kind

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Speaker 3: of ruling you could get in France, for example. But

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Speaker 3: our courts do not issue advisory opinions, and so the

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Speaker 3: only way to find out the answer to a legal

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Speaker 3: question is to do it in real time, as it were.

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Speaker 3: And so I think the reason that both President Obama

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Speaker 3: and now President Biden were reluctant to go that route

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Speaker 3: was because if you do, and then subsequently the courts say, actually,

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Speaker 3: you can't do that because the fourteenth Senment has a

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Speaker 3: narrower scope, or because even if the dead ceiling is

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Speaker 3: unconstitutionally you still don't have the power to borrow money.

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Speaker 3: Then you only find out after the fact, and in

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Speaker 3: the meantime a whole lot of people might have purchased bonds,

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Speaker 3: and that could add to the chaos, uncertainty, and economic damage.

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Speaker 1: There is a lawsuit filed by a federal workers' union

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Speaker 1: in Massachusetts. Is it on the theory that you have

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Speaker 1: said is a possible alternative to the fourteenth Amendment?

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Speaker 3: Yes, So that lawsuit, which I think is very well crafted,

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Speaker 3: is on behalf of unionized federal workers, thousands of them

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Speaker 3: who would risk not getting paid on time and being

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Speaker 3: unable to pay the bills. For their families, if the

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Speaker 3: government does not raise the dead feeling, and if the

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Speaker 3: administration then goes through with what is sometimes thought to

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Speaker 3: be the conventional wisdom of then prioritizing paying people who

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Speaker 3: have bonds and deprioritizing other government bills, so not paying

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Speaker 3: federal workers. Their theory is not that this would violate

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Speaker 3: the fourteenth Amendment, but following a line of reasoning that

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Speaker 3: I and Neil Buchanan, who's a macroeconomist at the University

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Speaker 3: of Florida, have articulated over the last dozen or so years,

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Speaker 3: the theory would be that this would be a violation

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Speaker 3: of separation of powers. And let me explain why that

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Speaker 3: would be so. Article one, section eight of the Constitution

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Speaker 3: gives to Congress all of the relevant powers of the purse,

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Speaker 3: the power to tax, the power to spend, and the

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Speaker 3: power to borrow. If the government passes sets of laws

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Speaker 3: that say, collectively, spend more money than the combination of

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Speaker 3: what you take in through taxation and borrowing, Professor Buchanan

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Speaker 3: and I say, well, that means that the government can't

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Speaker 3: comply with all three of those things simultaneously. Something has

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Speaker 3: got to give. Our analysis has always been that what

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Speaker 3: has to give then should be the debt sealing that

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Speaker 3: the debt sealing provision would be the one that you

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Speaker 3: don't comply with. And the reason is that you can't

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Speaker 3: do either of the other two things. Certainly, the president

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Speaker 3: isn't going to raise taxes on his own. That's not

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Speaker 3: power the president has. But the president also doesn't have

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Speaker 3: the power to prioritize, that is to say, to cut spending.

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Speaker 3: That's the power of Congress. The Constitution says Congress gets

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Speaker 3: decide how much we spend money on. And it's not

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Speaker 3: just that the president can't spend money without authorization. The

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Speaker 3: president also can't not spend money that he's been authorized

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Speaker 3: to spend. I can give you two relatively recent examples

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Speaker 3: of this. So President Nixon tried to do this. He impounded,

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Speaker 3: that is to say, didn't spend a whole bunch of

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Speaker 3: money that Congress had appropriated, and that was eventually slapped

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Speaker 3: down by the court. When President Trump did this with

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Speaker 3: respect to the money that was supposed to go to Ukraine,

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Speaker 3: that ended up being the first basis for the articles

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Speaker 3: of impeachment against him in twenty nineteen. Right, the idea

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Speaker 3: that you can't fail to spend money that Congress has

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Speaker 3: said you should spend. And the reason for that is simple.

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Speaker 3: Congress has the power of the purse. Budget deals are

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Speaker 3: carefully negotiated. There's all sorts of bargaining going on. If

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Speaker 3: the president could just decide, you know what, I didn't

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Speaker 3: want to spend the money on this combat fighter plane

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Speaker 3: or for this environmental project, so I'm just not going

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Speaker 3: to spend it, you would be taking over legislative power.

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Speaker 3: And so what this lawsuit argues is if the president,

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Speaker 3: in a debt sealing crisis were to say, I'm going

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Speaker 3: to pay the bondholders, I'm going to pay federal military contractors,

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Speaker 3: but I'm not going to pay all of these federal workers.

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Speaker 3: That would be a usurpation of legislative power, far worse

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Speaker 3: than for the president simply to instruct the Secretary of

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Speaker 3: the Treasury continue borrowing money the way you always do,

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Speaker 3: but only in the amount necessary to cover the revenue gap. Crucially,

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Speaker 3: what the lawsuit says is that Congress could, if it

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Speaker 3: wanted to give to the president discretion not to spend

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Speaker 3: certain funds. But it hasn't done that here, and it

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Speaker 3: certainly hasn't provided any kind of what is sometimes called

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Speaker 3: an intelligible principle, by which the president is supposed to

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Speaker 3: make the decision of whom to pay, when to pay,

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Speaker 3: whom to stiff by how much, and so forth, so

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Speaker 3: that in the absence of congressional legislation specifying a prioritization scheme,

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Speaker 3: it is a usurpation of legislative power because of the

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Speaker 3: vast scope of presidential discretion. As I say, that is

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Speaker 3: the theory of this lawsuit. It is also more or

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Speaker 3: less the view that Professor Buchanan and I have been

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Speaker 3: arguing for now for about a dozen years.

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Speaker 1: The judge in Boston has ordered a hearing for next

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Speaker 1: week on May thirty first, on this key argument, But

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Speaker 1: the Justice Department lawyer didn't take a position on that

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Speaker 1: question at issue.

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Speaker 3: So far right, So this goes back to a point

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Speaker 3: you made earlier, which is that although President Biden has

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Speaker 3: seemed to rule out the so called fourteenth Amendment option,

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Speaker 3: neither he nor Secretary Yellen has taken off the table

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Speaker 3: all of the other possible workarounds in the event that

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Speaker 3: a deal doesn't get through Congress. I suspect that what

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Speaker 3: the Justice Department is doing here is sort of holding

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Speaker 3: their cards as close to the vest as possible, because

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Speaker 3: they undoubtedly have a Plan B, but they want to

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Speaker 3: keep the pressure on the Congress to make a deal

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Speaker 3: by not saying what that Plan B is. I should

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Speaker 3: say this is not necessarily the best bargaining strategy. Sometimes

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Speaker 3: you want to make clearer to your bargaining partner what

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Speaker 3: you'll do in the event that the negotiations break down,

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Speaker 3: because arguably by ruling out or seeming to rule out,

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Speaker 3: these other workarounds, what the administration is doing is telling

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Speaker 3: Speaker McCarthy, hey, we've got no Plan B, and so

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Speaker 3: we need this more than you do. What you really

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Speaker 3: want is to put the pressure on the other side

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Speaker 3: to think that they need it more than you do,

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Speaker 3: and so ruling out Plan B doesn't seem to do that.

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Speaker 3: But as I say, I don't think that President Biden

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Speaker 3: has fully ruled out other options, whether it's the fourteenth

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Speaker 3: Amendment or even better, this separation of powers argument, or

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Speaker 3: some of the other ideas that have been floated.

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Speaker 1: So as the Union was pushed for the case to

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Speaker 1: be put on an even faster track, the federal judge

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Speaker 1: Richard Stern said, if the emergency is as dire as

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Speaker 1: you think it is. I would think that it's within

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Speaker 1: the power of the president to address it using executive

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Speaker 1: branch authority. What do you think he was saying there?

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Speaker 1: It's not my value Wick, So I'm.

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Speaker 3: Not really sure. Until we hit the so called X date, right,

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Speaker 3: the date in which the government runs out of money,

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Speaker 3: the president isn't going to address it by borrowing additional funds,

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Speaker 3: and for the moment, the Treasury is paying all of

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Speaker 3: the bills in full and on time. Now, maybe he's

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Speaker 3: suggesting that the administration could issue an executive order stating

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Speaker 3: what it's going to do in the event that the

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Speaker 3: clock strikes midnight with no legislation. But of course the

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Speaker 3: Union is suing the administration right, Saying that the administration

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Speaker 3: could do something seems like it's confusing who the plaintiff

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Speaker 3: and the defendant are, right, the plaintiffs of the and

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Speaker 3: who are saying, yeah, they should do something, so give

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Speaker 3: them an order to do it.

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Speaker 1: How likely is it that the judge would give them

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Speaker 1: an order to do it?

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Speaker 3: I think it's quite unlikely. Before you know, June one

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Speaker 3: or June two, that is, I think the judge here

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Speaker 3: quite understandably is hoping to be let off the hook

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Speaker 3: and waiting to see whether Congress enacts something in the

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Speaker 3: next few days.

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Speaker 1: In the area of I told you so, the president

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Speaker 1: could have announced from the start that the debt ceiling

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Speaker 1: was unconstitutional and it won't stop him from paying the

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Speaker 1: country's bills, and that's it.

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Speaker 3: So let me be clear. I have never said, and

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Speaker 3: I don't think that there is any good way around

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Speaker 3: the debt ceiling if Congress doesn't raise it. All we're

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Speaker 3: talking about are what are the less bad ways around it.

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Speaker 3: And it's not necessarily even my view that the debt

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Speaker 3: feeling is unconstitutional the way Professor Buchanan and I talk

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Speaker 3: about it, As we say, violating the debt ceiling is

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Speaker 3: less unconstitutional than the other plausible options, in particular, less

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Speaker 3: unconstitutional than usurping legislative power to make the president have

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Speaker 3: the decision over the entire budget. But what I have said,

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Speaker 3: and this is more as a matter of sort of

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Speaker 3: strategy and tactics and constitutional law, is that the president's

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Speaker 3: hand would be strengthened in any bargaining were he to

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Speaker 3: announce that, if push comes to shove, I'm going to

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Speaker 3: continue to issue debt. I should say I'm not a

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Speaker 3: professional strategist, tactician, or politician. And so when I say

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Speaker 3: that they should have announced that, I don't say that

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Speaker 3: with enormous confidence. I have greater confidence in my legal

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Speaker 3: analysis than I do in my ability to project how

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Speaker 3: all the politics plays out.

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Speaker 1: But no one has that ability, as we've seen. What

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Speaker 1: are some of the other suggestions out there?

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Speaker 3: There are other suggestions floating about. One that was popular

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Speaker 3: back in twenty eleven and has been refloated this time

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Speaker 3: around is a seemingly crazy idea to have the US

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Speaker 3: Mint create a coin with a face value of approximately

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Speaker 3: three trillion dollars and deposit this with the Federal Reserve,

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Speaker 3: which would then credit the Treasury's account by three trillion dollars,

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Speaker 3: and they would use that money to pay the government's bills.

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Speaker 3: The idea is so facially outlandish that I believe the

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Speaker 3: administration has ruled it out. In addition, I don't actually

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Speaker 3: believe it has the legal advantages that as proponents say.

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Speaker 3: That is to say, I don't think the statute authorizing

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Speaker 3: the creation of these coins is for anything other than

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Speaker 3: collector's items and commemorative coins. But that's one idea that's

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Speaker 3: floating around a somewhat less ridiculous idea is to have

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Speaker 3: the government borrow money but to issue bonds that either

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Speaker 3: have no expiration date or that pay a super premium

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Speaker 3: rate of interest. And the reason to do that is that,

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Speaker 3: given that the way that the Debt Feeling Statute is written,

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Speaker 3: the face value of those bonds would be much lower

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Speaker 3: than what the government could sell them for, and so

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Speaker 3: the government would be able to actually issue a lot

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Speaker 3: of debt, not all of which would count against the

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Speaker 3: debt fealing, and so that would buy a whole lot

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Speaker 3: of time potentially. I think this argument is somewhat more

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Speaker 3: plausible as a matter of the statutory text, but it

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Speaker 3: would also be subject to the same problem that the

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Speaker 3: President had with invoking the fourteenth Amendment, namely, there would

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Speaker 3: undoubtedly be litigation over the validity of those bonds.

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Speaker 1: Well, thanks so much for covering the entire landscape for us.

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Speaker 1: That's Professor Michael Dorf of Cornell Law School, and that's

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Speaker 1: it for this edition of the Bloomberg Glaw Show. Remember you

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Speaker 1: can always get the latest legal news on our Bloomberg

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Speaker 1: Law podcasts. You can find them on Apple Podcasts, Spotify,

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Speaker 1: and at www dot Bloomberg dot com, slash podcast Slash Law,

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Speaker 1: and remember to tune into The Bloomberg Law Show every

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Speaker 1: weeknight at ten pm Wall Street Time. I'm June Grosso

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Speaker 1: and you're listening to Bloomberg