Editor’s Note: We first published this piece, cross-posted from WashingtonPost.com, on July 6, as the debate over the debt ceiling began to heat up. It’s even more appicable now, as August 2 comes closer, with no deal in sight.
On its current course, the United States is four weeks away from defaulting on its debt for the first time in its history. If that happens, businesses will fail. Financial institutions will fail. Home values will decline. Mortgage rates will skyrocket. Spending and investment will all but disappear. Social Security checks will stop being mailed. Everything from military pay to food inspection will be compromised, if not fully cut off. The millions upon millions of Americans who are unemployed or underemployed will be joined by millions more.
Across the world, America’s second financial collapse in three years will drag down already fragile economies in Europe, Latin America and Asia, potentially creating a “worldwide depression,” as Senate Majority Leader Harry Reid described it. In short, we would be thrown back deep into economic turmoil—only this time with even fewer tools to crawl our way out.
In theory, this is unthinkable, and it will be remedied by reasonable political parties making reasonable concessions across the negotiating table. But Republicans have been negotiating in bad faith, unwilling to compromise even an inch on their extremist and absolutist positions. Some are no longer willing to come to the table at all.
With that backdrop, President Obama may find that there is only one course left to avoid a global economic calamity: Invoke Section 4 of the Fourteenth Amendment, which says that “the validity of the public debt of the United States … shall not be questioned.” This constitutional option is one that the president alone may exercise.
If the Aug. 2 deadline arrives and no deal has been made, Obama could use a plain reading of that text to conclude—statutory debt ceiling or not—that he is constitutionally required to order the Treasury to continue paying America’s bills. In that sense, this is not just a constitutional option, it is a constitutional obligation, one even the Tea Party will have trouble denying.
There are reasons why such a solution is less than ideal. There ought to be some concern about executive overreach; the very idea of the president deciding which laws are and are not constitutional has disturbing ramifications. And to the extent that the goal of the move is to prevent market panic, it remains an open question as to whether it would succeed. But market panic will surely come with the failure to reach a deal altogether. The consequences of default are simply too severe—and too long-lasting—to take this option off the table. It may not be ideal as an elective choice, but as an option of last resort, it is a necessity.
Editor’s Note: Read the full text of Katrina’s column here.