Opinion | The Debt Ceiling: A Dumb Feature of American Law

The debt ceiling is a stupid aspect of American law. Congress approves spending but then separately votes on whether to pay its bills. If it doesn’t pay, the result is catastrophic. According to Moody’s Analytics, even a brief breach in the debt ceiling could cause a recession. The White House predicts a more prolonged default would lead to a crash similar to the 2008 financial crisis. All this simply to pay what the US already owes and could easily borrow. Crazy.

Debt ceiling supporters argue that it has always existed and, for the most part, was beneficial. While the US has never defaulted on its debts, the debt ceiling forces compromise between parties. However, constantly gambling in the game of Russian roulette is not a sound decision to make.

It is understandable why some are looking to ways to eliminate the debt ceiling. Democrats had the opportunity to remove it during their control of the House and White House in 2021-22, but they did not.

Currently, two unconventional tactics are attracting the liberal imagination: one, President Biden declares the debt ceiling unconstitutional, citing the 14th Amendment that “the validity of the public debt of the United States … shall not be questioned.” Five Senate Democrats, including Bernie Sanders and Elizabeth Warren, advocate this. Sixty-six progressive Congressional Democrats have also sent Biden a letter on this issue.

The second tactic is for the Treasury Department to exploit a loophole in the 1997 law, minting a platinum coin worth any value, i.e., a trillion dollars, and subsequently using the money to pay the government’s debts.

Biden has said he is “considering” the constitutionality of the debt ceiling. However, it would require litigation, which is why he and other Democrats are apprehensive about pursuing these ideas.

The outcome would likely depend on the stance of three conservative Supreme Court justices: John Roberts, Brett Kavanaugh, and Neil Gorsuch. Many legal scholars have argued that the Supreme Court could strike down an unconventional solution.

The conservative reading of these laws is not necessarily right. Still, the Supreme Court has disregarded decades of precedent recently, overruling Roe and entertaining cases that even conservative scholars previously regarded as farcical. As such, the outcome is uncertain.

Biden’s political strength is that he stands for normality. If the debt ceiling is declared unconstitutional and then ruled unconstitutional by the Supreme Court, Biden would be accountable for any market chaos that ensued. If the administration continues to do nothing, then Republicans would take the blame for the consequence of their demands not being met.

Currently, the positions are clear. The White House is receptive to budget negotiations but opposes debt ceiling brinkmanship, while Republicans are threatening default if their demands are not fulfilled. They are holding the pin of this grenade in visible sight of the American citizens. Biden needs to think carefully about the risk of removing it from them and holding the pin himself.