The biggest obstacle to a debt ceiling increase is the House of Representatives. The Progressive Caucus may oppose the kind of cuts that would secure a bipartisan deal, but there are plenty of Democrats who would support a deficit deal. A growing list of House Republicans either don't fear default or have pledged to vote against a debt ceiling increase absent absurd preconditions, despite the overwhelming consensus is that a failure to raise the debt ceiling would cause a global financial crisis.
In the face of such a predicament and with the fate of the world quite literally in the balance, some Democrats and left-leaning commentators have suggested that President Barack Obama should bypass Congress altogether, invoke the 14th Amendment, and raise the debt ceiling unilaterally. Some think that the threat of the constitutional option strengthens Obama's negotiating position, but this is dead wrong.
Let's examine the possible scenarios for the debt ceiling talks:
Scenario 1: Obama and the GOP strike a grand bargain and pass $3 to $4 trillion in deficit reduction along with several hundred billion in immediate stimulus. The deal includes tax increases and entitlement cuts. This scenario enrages the bases of both parties, but the media applaud. Thanks to his support for tax hikes, Rep. John Boehner (R-Ohio) would be overthrown as speaker by the Tea Party. The anger among Obama's base would be eased by the improving economy, and the deficit-obsessed media would portray Obama as a "Serious Person" and a bipartisan deficit hawk.
Scenario 2: Obama blinks and he agrees to a smaller $1 to $3 trillion deficit reduction bill without any stimulus or revenue increases. This is the GOP's ideal option, particularly if they deprive Obama of a mechanism to stimulate the economy. In this scenario, Boehner could probably count on most of his caucus to vote to raise the debt ceiling and he would keep his leadership position. Having lost the debate and failed as a negotiator, Obama would be weakened significantly. His base would desert him. Thanks to large short-term spending cuts, the economy would slip into a double dip recession. The GOP would own the spending cuts, but Obama would own the economy.
Scenario 3: A standoff where the GOP rejects all revenue increases and Obama doesn't blink. The negotiations bleed beyond the default date and the United States briefly defaults. The stock market crashes, the unemployment rate jumps by 2%-4%, and the public turns against the GOP. The value of treasury bills is permanently destroyed as the world's safest investment. Political blame for the sluggish economy is either transferred from Obama to congressional Republicans, or assigned to all "Washington politicians." This is an unpredictable scenario, though conventional wisdom slightly favors Obama, having attempted (in good faith) to negotiate with the GOP.
Scenario 4: The 14th Amendment option. If Obama claims an obscure constitutional right (Section 4 of the amendment) to raise the debt limit, this lets Boehner off the hook. Instead of being forced to convince the Tea Party to accept tax increases, the speaker gets to sit back, attack Obama, and express outrage. The GOP could exploit the public's vague opposition to a debt ceiling increase and their distaste for messy procedural actions. Instead signing their names to huge spending cuts, the GOP would get to change the subject and object to the process. The Tea Party would initiate impeachment hearings. Obama could only argue that he had prevented yet another hypothetical disaster.
Since the public hasn't credited Obama with preventing the auto industry meltdown through the auto bailouts, preventing a financial meltdown by stabilizing the banking sector, or preventing another Great Depression with the stimulus, it is unlikely they will reward him for action on a hypothetical debt default. The American public rarely weighs counterfactual history in their assessment of their president.
The 14th Amendment solution weakens Obama's leverage over the negotiations. It is no wonder that the Treasury Department's General Counsel, George Madison, dismissed the rumors of a unilateral presidential solution, writing, "The Constitution explicitly places the borrowing authority with Congress, not the President ... Secretary [Timothy] Geithner has always viewed the debt limit as a binding legal constraint that can only be raised by Congress."
Photo Credit: Wikimedia Commons