Why The President Can’t Save Us By Fiat

Sean Wilentz claimed yesterday that Obama has the power to unilaterally raise the debt ceiling and avoid default. Balkin pushes back:

Wilentz assumes that Obama could stabilize the crisis by acting on his own. But there is good reason to believe that the opposite would occur.  If Obama is impeached, then the issue will shift from the constitutionality of what the House has done (using the validity of the debt as hostage) to the legality of what Obama has done. He will lose the higher ground in the debate, and the country’s focus will be taken over by an impeachment trial for months, as the economy spirals ever downward.  In the meantime, the validity of debt issued by the President will be repeatedly attacked in the courts by allies of the Republicans–who could purchase the new bonds and then demand a refund in order to create standing for a lawsuit.

Obama made similar points in his presser yesterday. Balkin’s argument makes me queasier, even as default, which is the likeliest alternative, remains unthinkable. The key section from the transcript:

 I know there’s been some discussion, for example, about my powers under the 14th Amendment to go ahead and ignore the debt ceiling law. Setting aside the legal analysis, what matters is — is that if you start having a situation in which there — there’s legal controversy about the U.S. Treasury’s authority to issue debt, the damage will have been done even if that were constitutional, because people wouldn’t be sure. It’d be tied up in litigation for a long time. That’s going to make people nervous.

So — so a lot of the strategies that people have talked about — well, the president can roll out a big coin and — or, you know, he can — he can resort to some other constitutional measure — what people ignore is that ultimately what matters is, what do the people who are buying Treasury bills think? And again, I’ll — I’ll just boil it down in very personal terms.

If you’re buying a house, and you’re not sure whether the seller has title to the house, you’re going to be pretty nervous about buying it. And at minimum, you’d want a much cheaper price to buy that house because you wouldn’t be sure whether or not you’re going to own it at the end. Most of us would just walk away because no matter how much we like the house, we’d say to ourselves the last thing I want is to find out after I’ve bought it that I don’t actually own it.

Well, the same thing is true if I’m buying Treasury bills from the U.S. government, and here I am sitting here — you know, what if there’s a Supreme Court case deciding that these aren’t valid, that these aren’t, you know, valid legal instruments obligating the U.S. government to pay me? I’m going to be stressed, which means I may not purchase. And if I do purchase them, I’m going to ask for a big premium.

So there are no magic bullets here.