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Obama's best argument for getting around debt ceiling? Lex posterior derogat priori

President Barack Obama
REUTERS/Jonathan Ernst
President Obama has tried to keep the public argument on what you might call the hypocrisy of the Republican position.

On Friday, House Republicans announced a limited cave-in to President Obama's demand that they raise the debt ceiling. If their limited/partial/temporary surrender is accepted by the Dem-controlled Senate and Obama, the effect will be to kick the moment of truth down the road a couple of months. But if the two parties and the two branches of government have not reached some kind of agreement by then, the nation will still face the same set of ugly choices.

There’s a legal argument for getting around the crisis that seems more valid to me than the other two that have recently received much more attention: Lex posterior derogat priori. It means that when two laws come into conflict and both cannot be applied, the more recently enacted law trumps the older law.

I couldn’t bring myself to be in favor of the magical-trillion-dollar-platinum-coin trick as a way to end the debt ceiling extortion. In fact, it was really troubling that so many smart people thought such a gimmick could work.

And the idea that section 4 of the 14th Amendment (which states that “The validity of the public debt of the United States, authorized by law … shall not be questioned”) didn’t work for me either (although it was advocated by no less an expert than former President Bill Clinton). It doesn’t strike me that what the Republicans are doing is “questioning” the “validity” of the public debt. And, in fact, if the United States hits the debt ceiling, it doesn’t have to repudiate any of its debt nor stiff any interest payments to bondholders. It can abide by the limit by canceling other scheduled spending.

Obama has explicitly acknowledged these latter two ideas and said that he won’t utilize either of them. He has tried to keep the public argument on what you might call the hypocrisy of the Republican position. Congress authorized the spending and appropriated the money to cover it. If they want to talk about cutting future spending to bend the fiscal curve toward sustainability, he’s willing to engage on that. But he will not pay a ransom to raise the debt limit to cover appropriations for which Congress – including the Republican-controlled House – already voted.

That works for me as a talking point and as a political position. But I’ve recently become aware that the political argument also contains within it a legal argument that seems less risible than the magic coin.

The argument of Lex posterior derogat priori

Law professor Alex Glashausser of Washburn University in Kansas wrote about this in June for the Huffington Post and a colleague recently brought it to my attention. The current appropriation bills (which tell the executive branch to spend the money) are in conflict with the older law (the debt ceiling law, which tells the president not to borrow more than a certain amount).

Under the doctrine of lex posterior, the newer law trumps the older one. Under this theory, Obama just spends the money and issues the bonds to borrow what he needs to pay for the spending. The message to Congress would be quite consistent with Obama’s public argument: If you want me to stop borrowing money, stop passing spending bills that require me to borrow money to pay for the spending.

“The president would simply announce that Congress had created a 'Catch-22' situation requiring him to both borrow and not borrow the money,” Glashausser told me. He would take the position that the appropriation bills amount to an implicit repeal of the debt ceiling. “I wouldn’t say it’s a slam-dunk legal argument,” Glashausser said. “But it’s an argument the president could make with a straight face.”

If the debt limit was in the Constitution, that would change things. The Constitution trumps an ordinary statute, notwithstanding the order in which they were adopted. But it isn’t. The debt limit was created by ordinary statute back during World War I. The appropriation laws under which the the federal government is now engaging in discretionary spending is also a mere congressional enactment, a "continuing resolution" adopted just last year.

Lex posterior is a principle of statutory construction that takes effect when the legal system has to grapple with conflicting statutes. It’s not the only principle. Maybe the congressional Republicans have another one they can invoke to explain why they appropriated money they didn’t intend for the president to spend.

Just issue bonds

Obama wouldn’t have to go to court to do this. Under Glashausser’s theory, Obama would just have the Treasury issue the bonds to borrow the funds to cover what’s already been appropriated and announce he was doing it under lex posterior. It would be up to someone else to take him to court to test his legal theory. And it’s not exactly clear who might have standing to sue.

If someone did have standing, they could possibly ask a court for an injunction to prevent the spending while the case proceeds, although I wouldn’t really want to be the judge who issued such an injunction which, according to current thinking, would compromise the credit rating of the United States, crash the markets and bring about the end of civilization.

I bounced Glashausser’s idea off of Law professor Dale Carpenter of the University of Minnesota, who has helped me on other similar matters. “It’s an interesting idea and it’s not out of the question,” Carpenter opined.

Mike Steenson, who teaches law at William Mitchell, told me that the Glashausser theory "is at least plausible."

Steenson referred me to recent scholarly writings by George Washington University Law Professor Neil Buchanan and Cornell University Law Professor Michael Dorf, co-authors of two recent scholarly papers making a similar argument to Glashausser's. (Buchanan also wrote a version of it for the New York Times.)

The Buchanan-Dorf argument doesn't invoke lex posterior, but instead invokes the concept of a "trilemma." That's a situation in which one is faced with three bad choices. If the debt limit is reached and the federal government isn't bringing in enough current revenue to cover all the things on which Congress has authorized and appropriated spending, the president must decide to violate the law in one of three ways: He can unilaterally decree a tax increase (that would be crazy); he can pick and choose among all of the things he is obliged by appropriation laws to pay for and not pay for some of them (that would exceed his powers but that is what most writers have assumed Obama would do); or, option three, he could abide by all the appropriation and tax laws and choose to disregard the debt limit by continuing to borrow in order to comply with the other laws. Buchanan and Dorf describe the last one as the "least unconstitutional" of the three options.

Did Friday change anything?

But is it possible that the House Republicans have changed the situation with their decision on Friday? I would say they have, if their decision to push the debt limit crisis down the road two or three months becomes law.

In case you lost track of a key fact, federal discretionary spending is now occurring not under an ordinary two-year budget but under a special measure called a continuing resolution and that continuing resolution expires on March 27. If nothing else happens until March 27, the appropriations that cover about 40 percent of all federal spending (the portion that is so-called "discretionary" spending) will expire and the president will have no legal basis to continue spending on any but the the most emergent functions. That's the scenario for a so-called government shutdown, as University of Minnesota Congress expert Kathryn Pearson explained to me, which is different from the debt limit crisis.

Suppose the idea floated by the House Repubs on Friday  -- a short-term extension of the debt ceiling -- goes through. That would kick the debt ceiling crisis back to April or May and the government shutdown deadline would come into view on March 27.

The government shutdown crisis does not lend itself to the lex posterior theory. But, as Glashausser noted in an email to me on Sunday, if the country gets past the government shutdown crisis, it will soon be looking at the next coming of the debt ceiling crisis.

Of course, the big idea of a short postponement of the debt ceiling crisis is, at the moment, nothing more than a Republican talking point. There is no bill to make it happen and in order for such a bill to become law it would have to pass the Dem-controlled Senate and be signed by Obama, neither of which events are guaranteed.

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Comments (17)

The law current says that all

The law current says that all congressional spending as equally binding, which means that the "pick and choose" method is not a clear constitutional choice.

Discretion of which spending is top priority and which is not, lays the president open to significant legal challenges, including impeachment. The "impoundment" last proposed by Nixon, may well have landed Nixon in an impeachment trial, even if Watergate had not swam to the surface.

The last couple of years have brought the absurdity of the Republican position to the fore---relentlessly beating the drums of "out of control spending" and "waste, fraud and abuse", yet unwilling to even propose a detailed list of cuts to arrive their desired spending targets. They want Obama to do the heavy lifting of the proposing the cuts.

Well, as Bush2 stated it pretty clearly--he won't negotiate with himself. And that is exactly correct.

I can't see the Republican House handing more power to the President in the form of discretion with respect to spending appropriated money. I also cannot see the President enabling law that would allow the charade of a Potemkin budget that is not backed up by a real intent to spend money. And I cannot see the creation of a previously untested process of creating money (can you say "Obama-bonds"?). That is a route to impeachment.

So the most likely and staid route will be first invoice in, first invoice paid.

And why not?

What really would happen? If the "confidence" of the market is shaken by the US actions--where would people go? Eurozone? China? BRIC? Japan? Really? Look at the recent bursting of the grandest bubble ever blown--where did people go?

It's time that this nonsense stops. And now is better than in future days when there may be a more apparent challenger to US financial pre-eminence.

Latin

Just because a phrase is in Latin, doesn't give it any special legal authority. The fact it is, it's pretty easy to construct a very legitimate sound argument for just about any course of action the president chooses to take. And it's also the case that you can construct a very sound argument for doing nothing at all. The ease, and even the plausibility of such arguments isn't important, rather it's whether such arguments are persuasive to the constituency to which they are directed. The platinum coin was acceptable to economists like Paul Krugman, lawyers like Lawrence Tribe, but ridiculous and totally unacceptable to the doofuses who watch and are influenced by Jon Stewart. And believe me, there are a lot more doofuses out there voting than there are economists and lawyers, something for which we as a nation should be thankful.

The purse strings…

…are controlled by the House of Representatives.

If the House has passed the necessary spending legislation, and appropriated the money, then – while perhaps not obligated to do so – Obama is on firm legal and constitutional ground, it seems to me, if he chooses to spend the money as the House has seen fit to appropriate it.
The doctrine of lex posterior seems reasonable and plausible to me, even if it doesn’t represent the best possible solution, and I’m inclined to agree with Eric’s description of Obama’s public argument: “If you want me to stop borrowing money, stop passing spending bills that require me to borrow money to pay for the spending.”

That argument puts the responsibility back where it belongs, I think: on the House, currently under Republican control, where fiscal hypocrisy is merely one more on a list of hypocrisies practiced by the current version of the GOP. Assorted Republican leaders have been pointing fingers at the Obama White House about “uncontrolled spending,” when the White House and the president are simply doing what the House has told them to do, at least figuratively, with the spending bills it has passed.

If Democrats are guilty of “tax and spend” myopia, and they sometimes are, the same diagnosis could be equally applied to Republicans. The latter are merely better at disguising what they’re doing, and they’re very much better at distracting the public’s attention away from the disparity between GOP rhetoric and action. If spending is a serious problem for the federal government, as quite a few commenters on MinnPost have argued (arguments with which I sometimes agree), then the blame (if that’s the right term) for that spending has to fall on both Republican and Democratic shoulders.

The president cannot create federal funding streams out of thin air, and Republican finger-pointing at the White House is laughably hypocritical. The money has to be appropriated by the House, and for the past couple of Congresses, it’s Republicans who have controlled the purse strings. If the federal government is spending too much, it’s up to the House to put the brakes on – whether the Democratic-controlled Senate devises a budget or not. If putting the brakes on spending dumps us right back into “recession,” it simply proves that the blizzard of words emanating from the right about the American economy is… phrased politely… incorrect.

It would be a steep price to pay, societally, for confirmation that government spending IS necessary during times of economic contraction. Meanwhile, the debt ceiling serves as an unnecessary distraction.

If the "confidence" of the

If the "confidence" of the market is shaken by the US actions--where would people go?

Very often when the confidence in markets is shaken, they become increasingly illiquid, sometimes to the point where they cease to exist. A piece of paper with a picture of George Washington on it has value because we have confidence in it that it is money, negotiable in markets like your local Walgreen's. If we lose confidence in it, it just becomes nothing more than a piece of paper.

Generally speaking, international confidence in US debt hasn't been shaken much by the political charades we have been engaging in, for the last several years. They do see these things in relative terms, they don't see the United States as the kind of kleptocracy, most foreign governments are. There is a margin of safety for US markets in that regard. But I don't think the extent of that margin is infinite or indefinite. At some point the politicians in Washington do have the ability to destroy our economy if that is the tactic or goal that they choose.

I lost faith in the

I lost faith in the "efficient markets" hypothesis a long time ago. Markets are still supporting prices up to the very last minute before irredeemable and long-forseen bankruptcy and ultimate failure, despite immense volumes of data indicating a coming collapse. That is as true as the private sector as the public sector.

If there remains a viable markets for Japan's debt, let alone Greece's, there is no "efficient market" and "confidence" only affects the price of the moment, not a permanent state..

Efficient markets

Efficient markets are markets where all pertinent information is available to all participants. It's fairly obvious that no market is perfectly efficient, there is lots of pertinent information that some although not necessarily everyone knows, but stock and bond markets are usually considered very efficient. To say that a market is efficient is a very different thing from saying it's participants are either efficient or right. Markets don't support prices, but participants in markets can. If investors ignore information, that isn't a market problem, it's an investor problem. A market problem is one where there are no investors, not one where investors are making bad decisions.

Markets without participants

Markets without participants are not markets--it's not all HFT between computers

One year after the Treasury downgrade from AAA to AA+

(quote)

Believers in the strength of U.S. debt point to the bond market, where surging demand from buyers has pushed 10-year Treasury yields as low as 1.4%, from 2.58%, as bond prices have risen. One reason for that, however, is that investors have chosen Treasuries over bonds of other nations that have even bigger problems, while 10-year German and British bonds that S&P still rates AAA have even lower rates. More telling, says Undersecretary of the Treasury Mary Miller, is that the cost of buying insurance against a U.S. default, using derivatives called credit-default swaps, has dropped 18% since last August.

http://usatoday30.usatoday.com/money/economy/story/2012-08-03/us-debt-do...

(end quote)

The Treasury results show that it is all relative to the ROW

And as for the "efficient" stock market, the name of the day--Herbalife.

The end of the world has been predicted many times and has come darn few times.

There are probably several

legal arguments for the President to issue debt to ignore the debt ceiling law. There's a quote from a US Supreme Court case which I recall but cannot put my finger on at the moment which says to in effect, necessity is the source of all law. Like the old saying about the "mother of invention." This debate seems to me to highly abstract. Eric Holder is not going to go a grand jury and get an indictment against the President for ignoring the debt ceiling. Assuming there is some who can meet the now 57 varieties of standing to challenge the President in a civil action, that person would have to convince a series of judges going up to five of them on the Supreme Court. That's a tall mountain to climb. The Republicans have to realize this that they have virtually no leverage in this debate. Which is why they caved on Friday and will no doubt cave again to draw yet further lines in the sand.

Legal implications

There are all sorts legal issues involved. Among others, would bonds arguably issued in violation of a debt ceiling be legally enforceable. I think they would be, but hey what do I know? It's been argued elsewhere that by issuing such bonds, the president might be committing an impeachable offense. That's quite possibly true, but the reality is this president along with his predecessors, has commits potentially impeachable offenses on a daily basis, and nobody seems to notice or care.

I think this is a political issue, one that should be worked out by politicians, indeed can only be worked out by politicians. I have been encouraged by the decision to raise the debt ceiling in the short term, and I am discouraged by the refusal to take the issue off the table altogether. As always, if you don't like the solutions politicians reach elect different, and hopefully better politicians. We are not going to be saved by some court-like deus ex machina.

Bonds issued in violation of a debt ceiling

This was just an aside in your longer comment, but yes, I believe such bonds would be legally enforceable. Refusing to enforce them would be "questioning the validity of the public debt."

Debt ceiling

Why doesn't Obama just take reducing spending seriously and start closing military bases in red states?

Short term

Closing a base, like getting out of a country, saves money in the looong run, but cost more money now.
So from a political standpoint, it's not an attractive option.

Apart from the constitutional issues

It would be mostly a symbolic point, as closing down a military base is an elaborate proceeding (consider the environmental costs). Besides, no one in a red state would see the point ("Dang Kenyan's just punishing us!").

Let's not mock compromise

Eric:

Could you use the word "compromise" rather than "cave-in" or "limited/partial/temporary surrender"?

One of the problems that the political parties face in working together is the perception that compromise is a form of losing. I think that the conservatives should be applauded, not mocked, for their new-found flexibility. If we humiliate them, they're less likely to compromise in the future.

If we make this about winners and losers, the true losers will be the people.

David

In His Defense

In defense of Mr. Black, it is the modern day conservative movement that has re-defined "compromise" as "cave in".

Horror of horrors, they're all Republicans In Name Only. Cue the black helicopters.

Posterior

Or maybe Obama's just showing the Repubs Lex Luther's posterior.

Oh come on!

How can anyone NOT like the idea of a magic coin? At least have sucker minted as a back-up plan.