Debt Ceiling? A Made-Up Crisis We Need to End

Both Republicans and Democrats provoked Federal debt crises for decades, yet they willfully deny the possibility of the US defaulting on future loan payments. 

While all media focuses on former President Donald Trump’s indictments, they have lost interest in any future economic catastrophe from not raising a debt ceiling. Nevertheless, liberals and conservatives propose looking at our Constitution to avoid a repeat. 

They offer two competing solutions that depend on interpreting or amending the Constitution. If either solution were successful, the next battle between any Administration and Congress to balance the budget by raising a debt ceiling would be eliminated. 

Although the parties’ plans of being implemented are slight, they could surface big time before the debt limit returns on January 1, 2025. Consequently, it’s not too early to examine them. Are they realistic or impracticable?

The Democrats’ Plan – Reinterpret the Constitution

The Democratic Party has not pursued limiting federal debt with the same fortitude as the Republican Party. In this last standoff between them on needing to raise the debt limit, the Democrat’s progressive wing floated the idea of applying the 14^th Amendment to eliminate the debt ceiling by declaring it unconstitutional. Some progressives argue that the Amendment says that the federal government’s debts must be paid once Congress has appropriated money to pay debts. 

The Chair of the Congressional Progressive Caucus, Seattle Rep. Pramila Jayapal, wanted President Biden to make that case to the courts. She didn’t make a legal argument so much as a political one. She stated that what the debt created is “essentially preserving tax breaks for the wealthiest and making poor people pay for that.” 

Progressives could produce data to substantiate her point. However, none of it would be germane to the majority of the Supreme Court Justices who would decide whether to invoke the 14^th Amendment as the progressives would like. 

Biden took a nimble step to acknowledge Jayapal’s political assessment but bought time in pursuing an appeal to the courts. He was open to taking a test case to the Supreme Court with the argument that the debt ceiling is incompatible with the Constitution. He didn’t want to make that effort when the nation might be on the precipice of default. So, after he reached a settlement on increasing the debt ceiling, he considered going to the courts “a year or two from now” to test using the 14^th Amendment. And, he added, “But that’s another day.”

Biden probably reflected the attitude of most Ds in Congress in not rushing to the court before an agreement was reached. Rep. Adam Smith, a fellow Democrat of Jayapal’s from Washington State, summed up a general opinion that invoking the 14th Amendment would have invited an immediate lawsuit. The nation could have defaulted while the issue played out in the courts. 

Aside from the politics, the legal framework depending on the wording of the 14th Amendment, is a Hail Mary pass without a receiver. The 14th Amendment states that “the validity of the public debt, authorized by law . . . shall not be questioned.”  However, the conservative justices will put that wording into the context of the Amendment’s purpose. Congress passed the amendment in response to the South losing the Civil War. Congress was focused on not paying any obligation associated with the South’s expenses. Their intention was clear: 

“[Neither] the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligation, and claims shall be held illegal and void.”

The six Federalist Society members on SCOTUS will not ignore that context to consider allowing the 14^th Amendment to be used by liberals to fund more extensive government programs resulting from raising the debt ceiling. 

The most likely response is that the conservative justices would refuse to declare a statute unconstitutional when the solution to a disagreement between the executive and the legislative branches can be resolved through legislation. This is the argument that Kavanaugh made in siding with the liberals in the Allen vs. Shelby decision.

The Republicans’ Plan – Amend the Constitution

The Republicans, since 1936, have pursued a balanced-budget constitutional amendment, unlike the Democrats, who haven’t tried to connect the Constitution to resolving the debt crises until recently. Consequently, the Republicans have repeatedly introduced legislation to move their amendment forward. 

Their first close effort to passing a vote for the amendment was in 1982. With President Reagan’s support, the Republican-controlled Senate passed Joint Resolution 58 to Amend the United States Constitution. It required in every annual budget that its “total outlays are no greater than total receipts” without a three-fifths majority vote of both houses. It failed to pass in the House, falling 46 votes short of the 2/3 majority needed.

This year Sens. Mike Lee (R-UT) and Chuck Grassley (R-IA) introduced an amendment to the Constitution requiring the federal government to balance its budget each year. It would limit spending to no more than 18% of GDP and require a supermajority vote in both the House and Senate before raising taxes or increasing the nation’s debt ceiling. It has 23 co-sponsors. Meanwhile, House Republicans introduced Resolution 12, with 19 sponsors, with the same objective. Congress also came closer to passing the Balanced Budget Amendment in 1995, when Speaker of the House, Newt Gingrich, got the House to pass it, and the Senate came within one vote of also passing it.

A two-thirds vote of both Houses of Congress must propose a Constitutional amendment. If one party has at least 26% of the votes in either house, they can stop an amendment. This explains why passing amendments through Congress is rare and why this particular one has been around for decades without passing. 

However, some Republicans focus on Article V, which says that an amendment can be adopted through State Conventions. It would need to be ratified in three-fourths of the states. This is precisely what the founders did to bypass the state legislatures, who were reluctant to form a central federal government. The founders succeeded in having 9 of the 13 states ratify the Constitution and create the United States of America. State Conventions have never been used since.  

In the last decade, another effort is moving forward to invoke Article V of the Constitution and convene State Conventions to change the Constitution. In 2013, the Convention of States group, consisting of Republicans and conservatives, began working in all 50 states to pass a Convention of States Resolution. Although the initial focus was limited to adopting a balanced budget, the group has expanded the definition to include “limit the power and jurisdiction of the federal government, impose fiscal restraints, and place term limits on federal officials.”

It takes 34 states to hold a convention and 38 to ratify any proposed amendments. To date, 19 states have passed a COS Resolution. The Republican Party has not formally endorsed the effort. The Democratic Party has ignored it entirely.  Its success seems unlikely, even though a recent poll by Trafalgar Polling shows that 81.3% of Republicans, 63.3% of independents, and 50.2% of Democrats support calling a Convention of States. 

Bottom Line: Congress Must Make Decisions, Not the Supreme Court

Putting aside the economic impacts and political risks of adopting a balanced budget amendment by either method, relying on the Constitution’s guarantee to have a balanced budget is more of a rallying cry than a successful strategy. The reality is that for the foreseeable future, our federal budget deficit will continue to be a product of multiple appropriation bills that are voted on separately. 

The debt ceiling must give way to avoid future threats of collapsing our economy when one party objects to one specific policy. A restricted range of future costs must accompany each appropriation bill. Once approved, the costs are fixed and cannot be increased beyond that range. This approach will focus congressional debates on specific policies rather than broad-brush accusations of spending too much money and the government going into debt. 

Congressional debates and delaying strategies will continue, but the damage they engender will be confined to the program being funded. Consequently, each party will be forced to take public positions on how much they will spend on a project. The parties must schedule the appropriation bills by priority. And then track their accumulative costs to allow for a realistic projection of the total federal debt load to be incurred. A program must be funded at a lower level if it exceeds that amount. 

Unless we incorporate fiscal discipline within the appropriations process, we will continue to cycle through the fear of defaulting on our debts.