Tuesday, July 23, 2024

Opinion | The debt limit law has its benefits. At least it used to.

Opinion | The debt limit law has its benefits. At least it used to.

Uncertainty surrounds the debt limit standoff. But it is a fairly safe bet the crisis will not produce a flood of legal scholarship arguing in favor of the statute that forced it. Much new conventional wisdom suggests instead that we’d be better off without a law requiring Congress periodically to vote on whether the Treasury Department can borrow additional funds lawmakers have already told it to spend — a financially necessary but politically dicey exercise.

Some legal experts are even contending that the statute has been unconstitutional all along, since the 14th Amendment affirms that the public debt “shall not be questioned.”

Yet in 2005, Anita Krishnakumar, at the time a professor at St. John’s University Law School, did publish a 53-page article called “In Defense of the Debt Limit Statute” in the Harvard Journal of Legislation. And her excellent work bears rereading today, for its arguments about why the debt limit statute was not only constitutionally necessary, as Congresses that have repeatedly voted to raise the limit believed, but also appropriate, as a matter of policy.

The debt limit statute is an exercise of Congress’s constitutional power “to borrow money on the credit of the United States,” but in the form of authorizing the treasury secretary to issue bonds as she sees fit, up to a certain dollar amount.

When Congress enacted the first such law in September 1917, it was seen as a great improvement over the previous practice, which had called for Congress to vote on each new bond issue separately, as it had done in 19th century crises, notably the Civil War.

As suggested by the timing — amid the Wilson administration’s World War I mobilization — this reform would eventually prove a great enabler of both the United States’ 20th century rise as a superpower and the federal government’s increased role in domestic affairs.

The debt limit statute gave the U.S. government flexibility to manage macroeconomic conditions via fiscal policy, as well as to meet global responsibilities during World War II, the Cold War and — at the time Krishnakumar wrote — the response to al-Qaeda terrorism after Sept. 11, 2001.

And yet it did so while preserving lawmakers’ “constitutionally necessary role in effecting congressional control and accountability over borrowing and the national debt,” as Krishnakumar put it.

What’s more, she argued, periodic debt limit debates served a healthy function: to force Congress to confront indebtedness as a separate issue affecting the national interest, free from the party and interest group horse-trading that surrounded individual tax and spending bills.

The risk of default had repeatedly proven “exaggerated,” she noted, which was true in 2005 and — as of today, at least — still is. Krishnakumar even endorsed using debt limit debate as an occasion to make reforms on actual budget policy, citing the Gramm-Rudman-Hollings deficit reduction plan that a bipartisan group of lawmakers attached to the 1985 bill.

In hindsight, though, Krishnakumar’s upbeat view rested on assumptions that no longer seemed applicable. One was that both parties would pay more than lip service to fiscal responsibility, under pressure from constituencies that actually cared about the issue. This has changed, after years in which repeated bouts of massive borrowing appeared both unavoidable — due to the Great Recession and the pandemic — and less economically damaging than fiscal hawks had warned.

Political polarization has reached levels her 2005 analysis understandably did not foresee, driven most recently by the rise of Donald Trump. The former president has transformed the GOP into a populist party whose ultras almost seem to relish the disruption that breaching the debt limit would unleash. They hold the balance of power in the House of Representatives.

Far from seeing the debt limit reauthorization as a chance for a forthright debate about deficits, or even good-faith bargaining with the Democrats, a significant element of the Republican Party seems primarily interested in “owning the libs.”

This has provoked an equal and opposite reaction among Democrats, making it that much more difficult for President Biden to compromise on his demand for a “clean” bill.

Reflecting on the current GOP brinkmanship, and a previous episode of it in 2011, Krishnakumar, who now teaches at Georgetown University Law Center, told me, “I didn’t anticipate that people would be willing to go as far as they did.”

Forcing focused congressional deliberation on the national debt level “is still a good idea but kind of impossible with a total breakdown of bipartisanship,” she acknowledged.

Even at this late date, a negotiated settlement is still possible. The alternatives are just too risky: a default, or a constitutionally dubious presidential seizure of borrowing power, under the supposed authority of the 14th Amendment.

The mere fact that we face such a predicament, however, is a reminder that all laws, the debt limit statute included, ultimately depend on a minimum of national consensus to support them. So, too, does U.S. power internationally and the constitutional system itself.

That consensus is eroding; and the outcome of this debt limit crisis will provide the latest reality check on how much damage has already been done.

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