Regarding this post, Seth Barrett Tillman writes:
There is a new view that the President has authority to sell newly issued government debt, absent congressional authority (i.e., Congress’s raising the debt ceiling).
Professor Epps, Dorf, and Buchanan et al. may be right or they be wrong about the constitutional point. (Disclosure: My own view is that they are wrong.) But it does not matter if they are right or wrong. The Constitution is not the relevant body of law.
The relevant body of law is fiduciary duty law. No trustee, director, or officer of a primary dealer (the organisations which actually buy newly issued federal debt) would touch debt issued by the President absent either (1) congressional consent, or (2) Supreme Court approval of the practice. Any such purchase by a primary dealer would be clear violation of its fiduciary duty of care to its stockholders. Full stop. Ex hypothesi, Congress will not have consented: that’s why the President’s action would be unilateral. Likewise, judicial approval could only happen (long) after the Treasury sells the debt. To sell the debt, the Government would have to agree to an astronomical premium, and that would leave the government much worse off than not selling debt at all.
Epps, Dorf, Buchanan and other make an interesting theoretical point (like some which I have made!), but wholly impractical point (ditto). The President cannot sell debt on the credit of the United States absent congressional authority. It is a matter of private law, not public/constitutional law.
Very well put. And it reminds me of a further point regarding Section 4 that I intended to make yesterday. Far from supporting a unilateral presidential power to issue debt, Section 4 points the opposite direction. It says (emphasis added):
The validity of the public debt of the United States, authorized by law … shall not be questioned.
Thus the validity of debt not authorized by law can be questioned — and rightly so. Section 4 itself highlights the link between validity and congressional authorization.
One further point inspired by Professor Tillman’s comments. I do think that Congress could retroactively authorize debt issued by the President. This would be the equivalent of Congress authorizing a number of constitutionally dubious actions by President Lincoln at the outset of the civil war, when Congress was not in session, most notably the suspension of habeas corpus.
If that’s right, then at least some of Eric Posner’s essay, which I criticized yesterday, is correct. The President could issue debt (assuming he could get anyone to buy it) on the understanding that he would ask Congress to approve it retroactively. But I think the implication of this position is (or should be) that if Congress did not retroactively approve (a) the issued debt would be invalid, and (b) the President should resign his office. I’m sure Posner does not see it that way, however.
FURTHER NOTE: Professor Tillman also has this short essay taking issue with the view of Michael McConnell and others that in the event the ceiling is not raised, the President has an obligation to pay bondholders and pension obligations ahead of other obligations.
NOTE: This article was originally posted at The Originalism Blog, “The Blog of the Center for the Study of Constitutional Originalism at the University of San Diego School of Law,” and is reposted here with permission from the author.