Stop the charade: The federal budget is its own ‘debt ceiling’


American lawyers whose liability classes used some edition of the old William Prosser casebook will recall an archaic Kansas statute, ostensibly apocryphal, that Professor Prosser noted for tongue-in-cheek pedagogical purposes. This statute would have required the conductors of two trains approaching each other from opposite directions that each stop his or her train and wait for the other to pass. The pedagogical point here, of course, had to do with what we should do in response to a statute that can’t really be designed to prescribe or prohibit what it appears to prescribe or prohibit – since presumably no legislator ever seriously intends would be, for example, that the railways become clogged with stationary trains all supposedly waiting for each other to pass.

Coincidentally, over literal centuries, lawyers and courts have developed common means of dealing with conundrums such as those raised by the proverbial statute of Kansas. After all, riddles occur regularly, albeit not always as comical as in the train story. Massive laws, such as a U.S. state code or the U.S. Code, grow organically over time, so that later passed legislation can easily conflict with previously passed legislation, sometimes in ways that escape the attention of newly legislators who have not. memorized decades or centuries of past legislation. When that happens, neither our states nor our republic can afford to stop all action – like those two Kansas trains! – waiting for new legislators to go back and harmonize all new laws with all previous laws.

Codes of law are not those of Euclid Elements or Newton’s principle, and last but not least. They are not formal systems whose axioms strive once and for all for complete theoretical completeness and internal consistency. They are practical tools that we use to address public challenges and publicly coordinate interacting private activities, which we therefore regularly expand and adapt to respond to new circumstances. Sometimes we do the latter through new legislation, and sometimes we use what lawyers call “canons of interpretation” instead. It is through the latter that we deal with ambiguous or contradictory statutes, such as the proverbial Kansan statutes between sessions of legislative speech.

At least three and in fact probably four such canons, I think, provide straightforward legal remedies by which President Biden and Treasury Secretary Yellen can simply ignore a stunt now brewing in Congress. I am referring to the latest Republican attempt at terrorist negotiations over a supposed US ‘debt ceiling’. Biden and Yellen, I argue, can just ignore the would-be hostage-taker this time and let the ball in their ‘court’ to bring in the treasury us Courts and then look at the supreme Court destroys it. Unless President Biden really wants the Republicans in the House to pretend to “bring us to the brink,” thereby making them commit political suicide as their predecessors did in 1995, 2011, and 2013, he should simply announce that the “debt ceiling” net “isn’t a thing” and instruct Janet Yellen to ignore it.

What are these canons I think President Biden can cite? They’re actually quite simple and, again, perfectly familiar to lawyers both inside and outside the White House and Congress. The first is what is called the “later in time” rule of legal construction. The idea here, logically enough, is that where two acts of law appear to conflict, the later act will be understood as an implied repeal of the earlier one — at least as applied in a way that creates conflict. The applicability of this canon to the latest ‘debt ceiling’ hodgepodge is simple…

Since the enactment of the Congressional Budget and Impoundment Control Act of 1974, Congress has ultimate control over the federal budget process and each year treats the budget proposed by the president as merely advisory. The “debt ceiling” regime, on the other hand, stems from the old Liberty Bond Act of 1917, passed by Congress as a means of (a) giving the president more budgetary freedom in financing the U.S.’s World War I effort, while also (b) imposing a minimal degree of control over the President’s use of that discretion during and immediately after the war.

That the “debt ceiling” regime was never intended to apply to current conditions, especially after 1974, is evident, of course, from the fact that it was not fought over by the White House and Congress in the decades after 1917. until opportunistic politicians started Newt Gingrich rediscovered it in US code in 1995 and decided to try to use it for stunt purposes such as shutting down the government. Be that as it may, the main point right now is that both (a) the 1974 fiscal regime trumps the 1917 fiscal regime, and (b) the current budget exceeds any supposed “debt ceiling” imposed after that budget became law.

The President should therefore only say that the last alleged ceiling has been implicitly abolished by the current budget, noting that this is also in line with Article 4 of the 14e Amendment to the United States Constitution, more on which follows, ratified by the former Confederate States as a condition of re-admission to the Union. That provision prohibits questioning the US national debt, which amounts to compliance with a supposed “debt ceiling” imposed after debt has already been incurred.

What about those other canons of legal interpretation I alluded to? Well, these complement the first nicely. Start with the canon ‘absurd result’. According to this, a law which under one interpretation produces a result that cannot possibly be rationally intended, while under another interpretation produces a result which could well be rationally intended, must be read in accordance with the latter, rationally intended interpretation. If, on the other hand, there is literally no rational interpretation possible, then the alleged ‘law’ in question is treated as null and void.

The absurd result canon, of course, provided a means of dealing with the apocryphal Kansas train statute I opened with. But it also moves directly to the non-issuance of the debt ceiling, in a way that complements the later-in-time rule. For it is simply impossible to think that Congress would require the federal government to issue Treasury bills as well as the latest budget, and not borrow as much as is required for that budget because of earlier supposedly “restrictive” legislation. In other words, we cannot rationally interpret Congress as having done to tax legislation what the apocryphal Kansas legislature would have done to the aforementioned railroad legislation. Instead, we should view the most recent budget as an implicit repeal of previous “debt ceiling” legislation that would make budget compliance impossible.

In fact, a third canon-like standard of legal construction deals with Constitutional conflict itself as a form of ‘absurd result’ to be averted whenever interpretatively possible. I refer to the “constitutional circumvention” doctrine, according to which a plausible interpretation of law that avoids raising a constitutional problem is preferable to one that does not avoid such conflict. In the case of the “debt ceiling,” the potential constitutional conflict is precisely the one I alluded to earlier. Section 4 of the Constitution 14e The amendment prohibits contesting the US national debt – something that Treasury ministers have understood since our very first Alexander Hamilton is critical to the integrity, stability and even long-term survival of our republic.

But (ironically called) “republican” gamesmanship with the old Liberty Bond regime of 1917, pursued with a view to undermining confidence in the solvency of those US sovereign debt instruments that form the basis of both the US and global financial systems amounts to as dramatic a direct attack on the full confidence and honor of the US as can be imagined. Any interpretation of the debt ceiling regime that appears to threaten default should therefore be rejected as it creates a constitutional conflict. It should instead be interpreted as the rule for later in time and the absurd result discussed above that the canon suggests.

One final canon of legal construction that President Biden and Secretary Yellen might find useful in the current circumstances is known as the “specific trump the general” rule. The idea here is that if a general regulation or regulation of a legislator appears to be in conflict with a more specific regulation or regulation of the legislator, the more general provision should be read as implicit including an exception for the specific provision. (For example, a “no littering sidewalks” ordinance will be read as compatible with another ordinance that requires people to litter their sidewalks when they are icy.)

Here, too, the canon in question enjoys simple application to current circumstances. Anyone who has read or tried to read an annual federal budget knows that there are literally thousands of fairly specific spending, tax, and borrowing mandates drafted by Congress and signed into law by the president. The so-called ‘debt ceiling’, on the other hand, says nothing directly about these thousands of budget items. Instead, it speaks as broadly as can be imagined, referring solely to a total amount of Treasury issuance from the First World War Liberty Bond issue in 1917. The last adopted budget – which again is the law – should therefore be regarded as an implied repeal of any ‘ceiling’ legislation that has been interpreted contrary to it.

Where does this leave us? I think it’s pretty straight forward…

Of course, if President Biden, like President Clinton and Obama before him, wants to give would-be financial hostages in Congress more rope to hang themselves on, he can play off the current pseudo-conflict by saying he “will not negotiate.” with terrorists” or “cutting off Social Security or national defense,” and enjoying yet another public backlash against Republican House clown shows. If, on the other hand, the president decides it’s long past time to pull the plug on this farce so the nation can address real problems, he should simply inform Republicans in Congress that there is no debt ceiling beyond the budget they own . have issued, then watch as they drop their latest attempt at hijacking or sue him and be told the same by the courts.


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