Magic Words that Repeal Fifth Amendment Discovered by Federal Judge

In an astonishing breakthrough in Constitutional jurisprudence, U.S. District Judge Royce Lamberth yesterday discovered that, if Congress uses either of two magic words "receivership" or "conservatorship", it can authorize the U.S. Treasury to take over any company in America and extract all of its profits, past, present or future. without having to compensate the owners for a "taking" under the Fifth Amendment to the Constitution. 

Dismissing a lawsuit by several investors who held stock in Fannie Mae and/or Freddie Mac that was outstanding in July, 2008 when Congress passed the statute under which the Federal Housing Finance Authority launched its conservatorship of the GSEs in September 2008, Lambeth first construed the statute to bar all judicial review of actions taken by FHFA during the conservatorship. 

Those actions included FHFA entering into an agreement, years after the terms of the U.S. Treasury's financing support had first been agreed, to transfer all of the GSE's net worth in perpetuity into the U.S. Treasury's coffers.  The Judge further held that the impact of that depletion on the liquidation preference attendant upon the preferred shares held by plaintiffs was not "ripe" for judicial intervention, diplomatically side-stepping the question as to when something occurring in perpetuity would become ripe for review.

He also ruled that the statute barred a shareholder-derivative complaint because it gave FHFA "all rights" of "any stockholder".  Likewise, it barred suit against a third party, such as the U.S. Treasury, that complained of decisions made by FHFA as conservator (supplementing that reading with a finding that none of FHFA's decisions to favor the Treasury conflicted with a fiduciary duty to stockholders because the two agencies did not have the same mission (which flies in the face of everything journalists have documented about the government's takeover of the GSEs in 2008, which Treasury dictated every step of the way), and because back in 2008 the Treasury was the only game in town to rescue the GSE's (overlooking that the net worth taking happened over two years later and leaving that decision totally unscrutinized).

The Judge then faced a choice as to what followed from those rulings:  (1) "Sorry, investors, all of your rights as a stockholder have been transferred to the federal government and there is no legal recourse under our laws for that"; (2) "Because FHFA's actions, even if pursuant to statute, deprived you of 'all rights' pertinent to being a "stockholder", the government must compensate you for the value of the rights it so took"; or (3) "This is not the right court to decide the takings question -- go see the Court of Federal Claims."

Acknowledging that the third option was supported by the weight of authority, the Judge nonetheless boldly chose to disregard it and embraced the merits of the takings claim, whereupon he announced, what to my knowledge is a brand-new "takings" doctrine: if Congress uses the words "conservatorship" or "receivership" when it empowers a government agency to take over a privately held company, a subsequent takeover, regardless of the terms, is not a "taking" of the stockholders' investment, regardless of their losses.

Here is his holding: "By statutory definition, the GSEs are subject to governmental control at the discretion of FHFA’s director. 12 U.S.C. § 4617(a)(2). Therefore, the GSE shareholders necessarily lack the right to exclude the government from their investment when FHFA places the GSEs under governmental control— e.g., into conservatorship.  This conclusion is especially true since the statute explicitly grants FHFA the power to assume “all rights . . . of the regulated entity, and of any stockholder . . . .  See 12 U.S.C. § 4617(b)(2)(i)."

The Judge seeks to buttress that reasoning by noting that the spectre of conservatorship or receivership for the GSEs has been in federal law since 1992.  True enough, but the common stock of Fannie and Freddie had been held by private parties for years before that.  He makes no effort to articulate why only the post-1992 era has judicial significance. 

In response to the shareholders' observation that such a rule "would mean that defendants could expropriate all of the shares in the most profitable and stable financial institutions in the country, without triggering the Takings Clause" the Judge scoffed; his reasoning only applied "when the government may 'legally impose a conservatorship -- i.e., when necessary to stabilize a stressed financial institution" [emphasis added; citation omitted].  Apparently, there is some extrinsic law that determines when Congress can take away rights.   I wish I could remember what that law was ....  Perhaps I should seek a refund of my law school tuition or my bar review course, because I don't ever remember being told that there was a law that limited Congress's power to take rights to situations when it is "necessary to stabilize a stressed financial institution.". Personally, I would have thought the body of law that limits Congress's power to take away rights might be a little broader than that. 

The absurdity of the Judge's reasoning is even more apparent when you read elsewhere in the opinion that "motives are irrelevant, for takings purposes, if the plaintiffs possess no cognizable property interests in the first place.  [Citations omitted] stand for the general notion that investors have no right to exclude the government from their alleged property interests when the regulated institution in which they own shares is placed into conservatorship or receivership.” [Emphasis added]. 

So his claim that there exists a limit on Congress's power to thrust companies into receivership while evading the Takings Clause is just false.  If "motives are irrelevant", then it doesn't matter whether the institution targeted was stressed or not, a financial institution or something else.  Congress could provide that a company may be placed in receivership if some agency found the company had failed to provide "equal pay for equal work", if it violated the Foreign Corrupt Practices Act, if its SEC filings were inaccurate, if it damaged the environment anywhere in the world, if it paid less than n% of its global income in taxes.  And it could obliterate judicial review of the relevant decision by the agency, and similarly immunize from recapture every payment the agency then caused the company to make to the U.S. Treasury.  And then it's just a short step toward taking over those companies owned by someone who wasn't sufficiently supportive of the parties in control of the government. See Chavez's and Maduro's Venezuela; the Kirchners' Argentina; Putin's Russia.  So companies will adjust and make sure they donate appropriately to the party in power....

Sure, one could try to reconcile the two statements by saying "the necessity to stablize a stressed financial institution is not a 'motive' -- it can be assessed objectively".  But that is disingenuous.  Courts have always deferred to judgment vouchsafed to an agency's expertise and there is no reason to predic that they would not continue to defer to an agency's determination that the institution was stressed.  The agency could just say it was acting pre-emptively, to prevent a greater harm that might arise from further deterioration.  Few judges would override such a determination, as this decision itself proves.  The rest of the Judge's opinion simply belies his claim that the power of Congress is limited.  That's just a fig leaf for unreviewable authority to take "all rights" of every "stockholder"  in every corporation without compensation under the Fifth Amendment. 

The Judge's reasoning boils down to this: once Congress passes a law that threatens a conservatorship of a company, investors have no stable property interest in that company, and thus implementation of the law effects no taking.  It's a self-executing solution to the cost that would be imposed by complying with the Fifth Amendment.  Just say the magic word "conservatorship", let the statute sit out there for a while, and poof, no taking.  Congress could write that into every regulatory statute -- if a company violates this law, the such-and-such administrator can put the company into conservatorship -- and we are well on the way to a socialist economy, comrades!

The Judge has simply missed the forest for the trees in this aspect of his opinion. If a law says the executive branch can take "all rights" associated with something, that's a taking, period.  Advance warning doesn't change that -- if anything it makes it worse:  if, on the day the first threat of conservatorship was signed into law, stockholders had sued over the prospect of a taking - because in Judge Lamberth's words, from that point on, they possessed "no cognizable property interests" -- courts would have said "not ripe - agency has taken no action yet pursuant to the statutory authority".  Yet, when the action is taken, this Judge says, "it's too late, you were warned they might do something some day!".  Heads, the government wins, tails the government wins.  There's never any moment in time when the investors' rights receive protection under the Fifth Amendment. That has to be wrong reasoning. There isn't anything left of the Fifth Amendment for investors if this ruling stands.   

Supremes Grant Cert in Noel Canning

Back in late January, I wrote a post advocating that the Noel Canning case on intrasession recess appointments should go to the Supreme Court, and another one comparing Larry Tribe's changes in opinion on the Consitutionality of such appointments, from the W administration (they were unConstitutional) to the Obama administration (they have magically become Constitutional).   Yesterday, the Court took the case, on a petition from the federal government, which lost in the D.C. Circuit, where a panel laid out arguments remarkably similar to W-administration-Tribe's).

I am delighted and continue to believe, as I did in January, that the odds of Noel Canning being affirmed are the better odds.   As I explained then, Justice Kagan might have to recuse herself on account of having taken a position on the issue while Solicitor General, and, if she doesn't, she will have to decide if she will stray from that view which was much less expansive than the Government's  tactically unwise carte blanche position in the D.C. Circuit.   Moreover, for reasons I laid out back in January, I think Justice Kennedy is increasingly more likely to throw his swing vote against the Government's position, particularly if the Government maintains the extreme position it expounded at the D.C. Circuit.  It will be interesting to see if Tribe submits anything in amicus and also to see if either of this self-contradictory op-eds on the topic get quoted in any of the opinions.

Since the January posts, I came across this article in the Virginia Law Review that endorses the Noel Canning decision wholeheartedly. 

Larry Tribe on Intrasession Recess Appointments; A Tale of Two Administrations

Reading up on the intrasession recess appointment issue I wrote about a couple of days ago, I came across a couple of writings on the subject from the eminent Constitutional law professor Laurence Tribe, whom I've always admired, so I looked to them for guidance.  I was disappointed.

In 2004, Professor Tribe submitted an amicus brief to the Supreme Court on behalf of the late Senator Edward Kennedy, calling on the Supreme Court to grant certiorari in the Evans v. Stephens decision and declare all intrasession recess appointments unconstitutional. The brief is here; an article by a co-author summarizing its argument is here, which precisely foreshadows Noel Canning when it states: “First … the term ‘the Recess’ refers solely to recesses between "Sessions" of the Senate, and not to intra-session adjournments….  Second, even if the Senate break that began last Friday were deemed ‘the Recess,’ the vacancy in the office of U.N. Representative did not ‘happen’ during that recess—it occurred instead while the Senate was sitting.”  I’ll call the brief “2004 Tribe” for the rest of this post.

In January of last year – I’ll call that “2012 Tribe” – Professor Tribe wrote an op-ed in the New York Times, which does not mention his earlier position, but defends the Constitutionality of President Obama’s intrasession recess appointments at issue in Noel Canning (and also that of Richard Cordray to head the CPFB). 

I was disappointed in seeking guidance because the two writings are pretty much contradictory.  The former is virtually identical to Noel Canning in rejecting the Constitutionality of intrasession recess appointments and the latter argues the President has an overriding duty to make them if laws aren’t getting enforced.  The 2012 article is really just making the "inherent power" argument that gets deployed whenever the Executive branch has expanded its power in American history in Constitutionally controversial fashion. It's always there and it's always conclusory, and it's used far too often, in my opinion, for a healthy Constitutional government. 

Here are some of the arguments 2012 Tribe makes, juxtaposed against 2004 Tribe’s statements on the same point.

2012  Tribe: “the scant judicial doctrine on recess appointments will surely benefit from careful assessment of text, history and structure….”

                    “The President’s right to [make intrasession recess appointments] is clearly stated in the Constitution ….”

2004 Tribe:  “the text, structure, purpose and function and pre-1921 history of the Recess Appointments Clause all confirm … that the President may not make ‘recess’ appointments during intra-session Senate breaks….” Amicus Brief at 11.  Pages 13-15 of that brief lay out the textual interpretation, which foreshadows very accurately that of Noel Canning.

*****

2012 Tribe says “Past practice … points the way. Presidents have long claimed, attorneys general have long affirmed and the Senate has long acquiesced to the president’s authority to make recess appointments during extended breaks within a Senate session.”

 2004 Tribe: “Nothing could be further from the truth.  In fact, both Judge Pryor’s appointment and the Government’s novel legal interpretation break with over 200 years of Executive Branch practice and Department of Justice’s interpretations ….”  Amicus Brief at 5. The pro-Presidential power position is described as “a sea change” and “groundbreaking” development that only occurred “over the past two decades”. 

*****

2012 Tribe quotes Alexander Hamilton:  “[The Recess Appointments Clause] aims, as Alexander Hamilton wrote in Federalist No. 67, included facilitating appointments ‘necessary for the public service to fill without delay.’”

2004 Tribe quotes a little bit more of Federalist 67:  “In Federalist No. 67, Hamilton explained that the recess appointment power was designed ‘to be nothing more than a supplement to’ the Appointments Clause, for use when ‘it might be necessary for the public service’ to fill without delay certain vacancies that ‘might happen in [the Senate’s] recess.’ The Recess Appointments Clause was added because ‘[t]he ordinary power of appointment is confined to the President and Senate jointly, and can therefore only be exercised during the session of the Senate.’ The Federalist No. 67, at 408 … The clear implication, of course, is that recess appointments would be ‘necessary,’ and thus permissible, only outside the ‘session of the Senate.’” Amicus Brief at 16.

*****

2012 Tribe: “attorneys general going back to Harry M. Daugherty in 1921 have held that the Constitution authorizes such appointments.”

2004 Tribe: “Daugherty’s ‘functional’ test misinterprets the clause.” Amicus Brief at 11.

 *****

The three NLRB members (and, for what it’s worth, Richard Cordray, the appointed head of the CPFB), were nominated on Wednesday January 4, 2012.  Noel Canning explains that the Senate had convened the preceding day, as required by Section 2 of the Twentieth Amendment, to begin the new session, so these could not have been intrasession appointments. “[T]he Senate was operating under a unanimous consent agreement which provided that the Senate would meet in pro forma session every three business days from December 20, 2011 through January 23, 2012”  So even if the pro forma sessions are called “shams” and ignored, from January 4 to 23 is only 19 days. 

2012 Tribe says such appointments, made during no more than a 19-day recess, struck “a badly needed blow for checks and balances with strong support both from the text and the original purpose of the recess appointment clause.”

2004 Tribe:  “Before 1982, Presidents virtually never made intra-session recess appointments during Senate adjournments of shorter than one month.”  Amicus Brief at 10.

“There is no evidence that the Framers thought it necessary to empower the President to make unilateral appointments while the Senate was adjourned within its session for short periods [referring to breaks such as “two weeks”]”  Amicus Brief at 17-18. 

“It is absurd to imagine that the Framers drafted the Recess Appointments Clause to provide the President such a power, to be exercised during intra-session Senate breaks lasting a fortnight, or a weekend, or overnight.”  Amicus Brief at 12.

*****

Although I have some sympathy for the functional argument, it's difficult to make the case textually, and it doesn't come across well when its advocate has to contradict himself to make it.  

Intrasession Recess Appointments Case Should Go to the Supreme Court

Friday, a panel of the D.C. Circuit invalidated President' Obama's expansive assertion of a power to bypass the normal Senate role on major appointments by filling vacancies during "intrasession recess appointments", i.e., any time within a legislative session when the Senate is not actively doing business (a "legislative session is comparable to a year -- there are typically two, and occasionally three sessions in a Congress).  The decision was unanimous on the lack of power to make intrasession appointments, although there was a dissent on another issue.  All three members of the panel were appointed by Republican residents, but confirmed by bipartisan votes in the Senate.  The decision is based on the text of the Constitution and does not turn on any of the facts of any of the individual appointments.  If upheld at the Supreme Court, it will limit the power of any President, not just this president.  I think the decision is the right one, but the odds are high that the issue will wind up before the Supreme Court. The case is Noel Canning v. NLRB.

Background

If a party to an NLRB proceeding does not comply voluntarily with the NLRB's orders, the NLRB needs to go to court to get an order of enforcement.   But a federal court cannot enforce an NLRB decision if the NLRB had no authority to reach its decision.  The Supreme Court decided that in New Process Steel, L.P. v. NLRB (2010) — Justice Stevens writing for an otherwise "conservative" 5-4 majority and Justice Kennedy writing the dissent — decided that NLRB must have three validly appointed members for its orders to be enforceable in federal courts.  At the time the NLRB reached its decision against Noel Canning, the NLRB had two members whose appointments had been ratified by the Senate and three on purported recess appointments by President Obama as to which there had been no advice and consent of Senate .

Language of Constitution

“[t]he President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session.” Art. II, § 2, cl. 3.  It's very clear that this means the President can make "intersession appointments", i.e., appointments during the period between sessions of the Senate when the Senate is by definition not in session.  The issue is whether the President can make them during breaks within a session, such as on holidays or weekends, or conceivably even in the dead of night.

Arguments and the Court's Opinion

The NLRB argued that Presidents can pretty much do what they want.   Unfortunately that put them in an untenable position, similar to that which bedeviled the government in the Obamacare litigation, of arguing for a power as to which there is no cognizable limit, for essentially doing away with any separation of power or other check and balance relating to the issue. "The Board never states how short a break is too short, under its theory, to serve as a “recess” for purposes of the Recess Appointments Clause."

The expansive approach to intrasession appointments has been based on nothing more substantial than a memo, which the panel rejects as vague and flimsy, written by Warren Harding's Attorney General — one of the weaker sources one can imagine,  given the patronage nature of appointments in that era and the corruption that took place in that particular administration and even within the Department of Justice during his tenure.

Taking a largely originalist approach, the panel distinguishes "the Recess" which the Constitution uses twice from mere "adjournments" which it refers to six times.   The word "the" is interpreted to refer to a specific single recess, that between sessions, not just to "a" recess, or "any" recess.  The "Recess" is always opposed to a "Session" which refers to the usually two or sometimes three sessions per Congress and thus means what occurs outside of a session; while "generic break[s] in proceedings" within a session, the panel opines, are captured by the word "adjournments" or variations thereon.

The Constitution specifies that the appointment expires "at the end of the next Session".  This might be considered ambiguous because the word "next" makes sense whether the appointment is made between two sessions, or during a "break" in the first of two.  But I don't think defenders of an intrasession appointment power can get much mileage of this.  First, it doesn't make sense applied to an appointment made within the last session of a Congress.  No recess appointment has been understood to run past the end of a Congress and through the first session of a subsequent Congress.  And it makes little sense that an appointment made in the first of two sessions last longer than an inter-session appointment.  So the best reading is that it only refers to appointments between sessions.  Second, they're still left with the extreme position that the President has power which, fully exercised, would render the Constitution's provisions about the advice and consent of the Senate a nullity or, at best, mere act of grace by a benevolent President, an implausible construction of the Constitution based on everything we know about the importance of separation of powers to the Framers, and an unwise one as well:  as the panel writes, "The power of appointments to offices was deemed the most insidious and powerful weapon of eighteenth century despotism  Freytag v. C.I. R., 501 U.S. 868 883 (1993)."

The Government argued that limiting the President's intrasession appointments would upset the balance of power between President and Senate.  The President's spokesperson and his allies are likewise maintaining this argument in their public advocacy to overturn it.  But the court coolly points out that that intrasession appointments were so rarely used for the first 160 years of Constitutional government, that you can count the number of intrasession Recess Appointments on one hand — implying that either it's implausible that we had 160 years of no balance or we got along fine being so unbalanced..  Really, the panel says, it's the government's interpretation that would defeat the careful separation of powers reflected in the Appointments Clause. 

This seems to me to be absolutely right.  Recess appointments are just another example of the modern expansion of executive power, a negative, not a positive, development for Constitutional government.  If a President has the power to make appointments any time the Senate is not actively doing business, then there is no "balance" outside of the President's will.  A President could fill every open Cabinet position, every agency head, every judicial vacancy on the first weekend of a legislative session.  Whether one might agree or disagree that that is a better method of governing, it is in no way a "balance" between Senate and President.  The riposte might be that the voters can express their views at the next election if they approve of that style of governing, but that, of course, is not the case regarding a lame duck like President Obama.  There really isn't any way to defend the power to make intrasession recess appointments that ensures a "balance" between President and Senate.

Why the Case Should Go to the Supreme Court.

The panel notes a conflict with an 11th Circuit case, Evans v. Stephens, 387 F.3d 1220 (11th Cir. 2004), cert. denied, 544 U.S. 942 (2005) that reached an opposite conclusion of the President's intrasession recess appointment power. That case involved a challenge to whether Bush 43's appointment of a judge to the 11th Circuit during an 11-day "recess" in the Senate was valid.  The court heard the matter en banc and decided, mainly relying on definitions of the word in dictionaries from the mid-18th century, that it was. 

The Noel Canning panel contends that the 11th Circuit defined the issue without reference to whether the Senate was in session, which served to eliminate the issue itself and thus nothing the 11th Circuit said should be given any weight.  This is a little facile.  The 11th Circuit did consider, like the D.C. Circuit, whether "the Recess" means one specific kind of recess, that at the end of a legislative session, or whether "the Recess" means a generic recess, as in "the dog is a quadruped".  They expressed their view in a double negative: "We do not agree that the Framers' use of the term 'the' unambiguously points to the single recess that comes at the end of a Session.  Instead , ... 'the Recess ' ... could just as properly refer generically to ... intersession or intrasession ...."  Personally, I find that reasoning unpersuasive; it's nothing more than presuming what the President did was Constitutional and placing on the challenger a  burden to convince them otherwise.  That is not what I think is the role of the courts in the separation of powers.  I think the Court is meant to patrol the way governmental units wield their power to make sure they adhere to the Constitution at all times. That one branch decides its action is Constitutional is of little importance, other branches and other Constitutional actors  have their view as well, and the Court has the job of striking the right balance.

But it's a direct conflict between the two circuits, so it provides a very strong basis for the issue go to the Supreme Court.

What struck me most about the two decisions is that Noel Canning does not directly address a Supreme Court opinion discussed in Evans, which is, while not completely on point, certainly inconsistent with the reading of Noel Canning.   Wright v. U.S., 302 U.S. 583 (1938) repeatedly uses the words "adjournment" and "recess" either interchangeably or in the opposite manner of that divined by the D.C. Circuit.  For just one example, at 598, the Court says:

Paragraph 4 of section 5 of article 1 provides: 'Neither House, during the Session of Congress, shall, without the Consent of the other, adjourn for more than three days, nor to any other Place than that in which the two Houses shall be sitting.'  It will be observed that this provision is for a short recess by one House without the consent of the other 'during the Session of Congress.' Plainly the taking of such a recess is not an adjournment by the Congress. The 'Session of Congress' continues.

(Italics added).  As Evans notes "the question of the meaning of the word "Recess" in the Recess Appointments Clause was not before the Court. We note, however, that ... [this] usage by the Supreme Court tends to support our accepting the President's interpretation that a "Recess" includes a break during a Session."  In response, Noel Canning simply repeats the panel's view that "the Constitution uses 'adjournment' to refer generally to legislative breaks. It uses 'the Recess' differently and then incorporates the definite article. Thus, the Eleventh Circuit’s interpretation of  'adjournment' fails to distinguish between 'adjournment' and 'Recess,' rendering the latter superfluous and ignoring the Framers’ specific choice of words."

What Might Happen at the Supreme Court

Superficially, one might assume that if Noel Canning goes to the Court, as it most likely will, Justice Stevens's replacement, Justice Kagan, will side with the New Process Steel dissenters and uphold the President's agenda, but I think that underestimates not only her, but Justice Kennedy as well as the rest of the Court. 

In her capacity as Solicitor General prior to taking the bench, Justice Kagan provided the Supreme Court a letter in connection with New Process Steel in which she stated that "the Senate may act to foreclose [recess appointments] by declining to recess for more than two or three days at a time over a lengthy period" - pointing to pro forma sessions that the Democratic-controlled Senate employed in 2007 to block George W. Bush from making recess appointments (in particular, recess appointment of the then-chairman of the NLRB).  It is certainly conceivable, but hard to imagine, that Justice Kagan would both fail to recuse herself and would abandon her prior public position.  

When Justice Kennedy concluded his dissent in New Process Steel by observing that the majority's reading left NLRB "defunct for extended periods of time", one can imagine that he might embrace a functional defense of intrasession appointments, upholding them to the extent needed to keep a Congressionally created organ of government functioning (although that only applies to one of the three NLRB appointments at issue in Noel Canning).  I don't think there is a textual basis for that, however.  And unlike New Process Steel, Noel Canning won't present a statutory construction issue of Congress's intent, but a major separation of powers issue that will fairly obviously determine to a great extent the scope of all Presidents' power to bypass the Senate on appointments.  I don't think political considerations will drive the decision in so simplistic a way.  And for the same reasons, I doubt the Court will  uphold broad power in the fashion of Evans.  I don't think an argument for unlimited power that the Government has been maintaining will go anywhere at the Court. 

Defenders of any sort of recess appointment power would have an uphill battle, in my opinion.  Assuming the rest of the Justices remain aligned as they were in New Process Steel, the Executive branch would have to pull off a triple play of sorts: (1) getting Justice Kagan not to recuse herself, (2) persuading her to adopt a position at odds with her prior public position, and (3) persuading Justice Kennedy not to go with the rest of the conservatives. If Justice Kagan does recuse herself, and the Court splits 4-4, then the result in Noel Canning would stand as it is. So the odds seem to favor an affirmance. 

The 14th Amendment and the Debt Ceiling

Today's New York Times reports that Senate Democrats called upon President Obama to employ "any lawful means" to avoid default should the "debt ceiling" be reached.  The reporter writes that "A Democratic aide said the senators would be inclined to have the president declare unilateral authority under the 14th Amendment, which says the debt’s validity 'shall not be questioned.'”

I was appalled.  All the Senators who are so "inclined" have taken oaths to uphold the Constitution.  Neither the 14th Amendment nor any other part of the Constitution confers "unilateral authority" on the President to borrow money on the credit of the United States Government.  That power is expressly within the power of the legislative branch (see Article I, section 8, clause 2: "The Congress shall have power ... to borrow money on the credit of the United States"). As Professor Laurence Tribe wrote in a New York Times op-ed, "The Constitution grants only Congress — not the president — the power 'to borrow money on the credit of the United States.' Nothing in the 14th Amendment or in any other constitutional provision suggests that the president may usurp legislative power to prevent a violation of the Constitution." A "14th Amendment solution" is completely at odds with the law the Senators sponsoring it have promised the nation they will uphold.  

The "14th Amendment argument" rests on two prongs.  1) disregarding or misinterpreting the phrase "debts of the United States, authorized by law" in the 14th Amendment  and 2) totally misunderstanding, or twisting, what "validity" means in respect of debt incurrence.  

1.  Here is the 14th Amendment text at issue:

"The validity of the public debts of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned."

The phrase "authorized by law" clearly modifies the words "debts".  Thus, for the validity of a debt of the United States to be unquestionable, that debt has to be "authorized by law".  There is no law that authorizes the United States to take on "debts" for borrowed money in excess of the debt ceiling and no law that authorizes any government official to do so without Congressional authorization.  So no Treasury notes, bills, or bonds can claim the protection of this provision if giving effect to their issuance, the total amount of debt outstanding exceeds the debt ceiling. 

Proponents would argue that the word "debts" means all payment obligations that would arise under current law; thus all such payouts are "authorized by law" not just debt for borrowed money. 

First of all, that isn't accurate. A very large portion of those so-called "debts" are actually not "debts" at all on any given day but simply forecasts of payments that are expected to be made as a result of future transactions, such as forecast salary for future services by federal workers, or projected bills on account of future visits to a healthcare provider for medical treatments covered by a federal health insurance program.  But workers could be furloughed and programs repealed, without leaving a legal debt of the government to either the worker or the program beneficiaries. The only "debts" at any given moment, are those as to which all events necessary to qualify for payment by the government have occurred. The rest is just an estimate about what will arise in the future.

Second, many Federal expenditures do not have specific payment deadlines the way bond maturities do.  So it is inaccurate to speak of the government defaulting on many types of Federal payments, even if they are "debts".  It just hasn't made them yet.

Third, as a matter of logic, the argument is fallacious and misses the point.  Saying Congress has authorized debts of a certain type -- not for borrowed money -- does not prove Congress has authorized debts of a different type -- debts for borrowed money.  There is a specific statute that says how much debt for borrowed money Congress has authorized, and debt for borrowed money in excess of that is clearly not "authorized by law".  

Fourth, if you believe that all spending is public debts and all debts should be paid, you must believe that the debt ceiling has been breached perpetually, because spending in a given year has always exceeded the debt ceiling.  But legal arguments that cause other laws and centuries of practice to be considered to have been nullities are usually rejected.

Last, the argument proves way too much. If you believe that all anticipated spending is "public debt" and its validity can't be questioned - even by a law passed by Congress and signed by the President, then logically you must believe that Congress can't adopt laws to reduce that forecast spending because that would call that future spending into question.  "No budget cuts ever" must be your mantra. Maybe it's a Constitutional violation for a lawmaker, a candidate or a pundit even to state in a speech or a column that the US won't be afford its spending in the future. Or for an arm of the government, such as its actuaries, to make such a forecast, even if it is statistically unassailable.  Tribe makes this point in his op-ed referenced above.

The proponents go on to argue that, if you believe the future payouts are all debts, there is a clear conflict between the law that establishes the debt ceiling, which will get in the way of paying them when due, and thus the 14th Amendment is violated by the debt ceiling.  Again, the premise is wrong but, in any case, there are multiple obvious answers to this. 

First, there are legally other means of paying those obligations, even if they are "debts", such as collecting taxes, printing money or selling federal property.  So there is no blatant conflict per se; rather, there are actually thousands of laws and plans and decisions that don't completely harmonize.  It's their sum that is in alleged conflict with the Constitution, as so interpreted, not the debt ceiling law alone. 

Second, even assuming a conflict exists between two statutes and further assuming it violates the Constitution, both of which I think are incorrect, nothing in that argument proves that the debt ceiling is the law that gets called un-Constitutional.  The debt ceiling limits payments under other laws, but the other laws call for payments that violate the debt ceiling law. It's a chicken and egg argument logically. The conflict can be harmonized just as logically by holding every appropriations bill passed after the debt ceiling was first adopted to be un-Constitutional.

2.  "Validity" is a legal concept in regards to a payment obligation.  It is not a financial representation or warranty or anything assuring means of payment.  It is customary in loan documentation for the borrower to represent when the loan is made that it is valid; a typical phrase is "legal, valid and binding".  That says nothing about whether the borrower will be able to pay when due, which will depend on events occurring after the loan is disbursed. For a large enough loan, a supporting legal opinion may be required by the lender, but when a lawyer says "the loan is legal, valid and binding on the borrower" no one understands that to mean the lawyer is opining on the non-legal topic of whether the loan will in fact be paid when due.  For a business borrower, payback of a debt will depend on the performance of its business and the degree of solvency and liquidity when payment approaches.  For a government borrower, it will depend upon the appropriations process and its access to capital markets.  A creditor concerned about security of payment may take collateral.  None of these concerns are legal questions having anything to do with "validity". 

In the context of a debt issuance by a legal, as opposed to a natural, person, "validity" just means that all the legal steps that the entity's governing rules establish for debt issuance have been taken appropriately, and there are no legal restrictions binding on the entity being breached by the particular issuance.  It says nothing about whether the steps necessary to have funds on hand to repay the debt when due have or will take place.  Validity is a necessary but not sufficient condition to getting a judgment in the creditor's favor in a court, but that's all; invalid debts may be paid back voluntarily and valid debts may go unpaid due to financial circumstances. For example, a credit card debt may be "valid" for purposes of getting a court judgment, but the debtor may be judgment-proof, having no assets or income available to satisfy the debt, and the debt will go uncollected.  A debt may also be valid for purposes of being allowed as a claim in bankruptcy, but the debt may be discharged without payment in full.  Whether a debt is valid or not is a legal issue but not the same as a financial issue.  

In sum, there is no credible argument that the President has unilateral authority to issue debt for borrowed money, under or in excess of the debt ceiling; the debt ceiling is not un-Constitutional under the 14th Amendment; and default in payment when due of  "debts of the United States" does not question the "validity" of that debt.  The "14th Amendment solution" is even less plausible legally than the trillion dollar coin proposal which I discussed yesterday.

Constitutional Disobedience?

I had planned to start this blog with a different topic, but since the blog takes its title from a clause in the Constitution, when I read Louis Seidman's op-ed piece in the December 31 New York Times, "Let's Give Up on the Constitution", I thought it would be appropriate to start off with a post about that instead.

In pretty outrageous language -- describing Constitutional provisions as "downright evil" --  Seidman, a professor at Georgetown, argues that the Constitution (1) causes political dysfunction, (2) keeps us "from debating the merits of divisive issues" and  3) "inflames our public discourse".  I gather the Times does not edit op-ed submissions, as no one seems to have asked Seidman  to explain how "public discourse" is "inflamed" if the public is not "debating  the merits of divisive issues", or how he identified "divisive" issues if they are not being debated.  In any case, I can't find anything in his op-ed that explains any of those bombastic accusations.

A blurb at the bottom of the column says that Seidman  has written a book about to be published titled "On Constitutional Disobedience".  The title, I suspect, harks back to Thoreau's essay "On Civil Disobedience".  But unlike Thoreau's essay, in which one introverted guy sitting in the woods advocated disobedience by individual citizens on matters of conscience, Seidman argues for federal officials to disobey the Constitution whenever they think it's in the best interest of the nation.  Which they wouldn't ever possibly confuse with their continued employment at taxpayers' expense.

Seidman offers up several historical anecdotes to support his argument that the Constitution gets in the way of getting good things done and should be merely "aspirational".  On casual inspection, the anecdotes prove to be, in most cases, mere statements of personal opinion by famous government officials:  Jefferson thought this, FDR said that, Justice Jackson believed such and such.  But this is just an ad hominem argument; the remarks he quotes never triggered an overthrow of the role of the Constitution as the supreme law of the land, which for 225 years has remained the case.  The small handful of occasions when a consensus formed around a particular deviation from the then-prevailing interpretation of the Constitution -- the Louisiana Purchase; the addition of the post-Civil War amendments notwithstanding their somewhat coercive ratification; and the New Deal -- are too rare to lead to the conclusion that ignoring the Constitution should be a routine practice.  By way of analogy, policemen have to shoot people on rare occasions, and many of those occasions resolve significant problems, but that fact doesn't mean it should become routine for policemen to shoot people.

Seidman also references the Emancipation Proclamation as an example of extra-Constitutional action by the executive.  But as everyone who has seen the movie "Lincoln" knows, (a) there was a plausible Constitutional basis for the Proclamation as a "war power" (indeed, separating slaves from their masters had been justified under the law of war in the military theater by General Butler at Hampton Roads in the first month of war); and (b) more importantly, the Constitution was amended in 1865 to incorporate the result.  So, after 148 years of undisputed Constitutional resolution of the power of states to allow slavery, it seems pedantic to base an argument for overthrowing the Constitution on an ambiguity that existed during 2 prior years. 

To illustrate his argument that the Constitution causes "political dysfunction" and thus should be disregarded, Seidman identifies the requirement of Article I that all revenue bills must originate in the House.  This requirement  has little practical significance today, because, if the House wants to get behind a Senate tax measure, it can simply adopt that measure as an "amendment" to one of its own prior revenue bills, as occurred just this past week; Seidman does not mention that.  To offer something so insignificant  as proof that the Constitution as a whole should be disregarded is like deciding that, because you can't start your car until you put your foot on the brake, you should really just set your car on fire.

Seidman next asks the reader to "Imagine that after careful study a government official — say, the president or one of the party leaders in Congress — reaches a considered judgment that a particular course of action is best for the country. Suddenly, someone bursts into the room with new information: a group of white propertied men who have been dead for two centuries, knew nothing of our present situation, acted illegally under existing law and thought it was fine to own slaves might have disagreed with this course of action. Is it even remotely rational that the official should change his or her mind because of this divination?"

There is an awful lot wrong with this caricature, which emanates often from the academy, post-critical legal studies.  First, while the Constitution may have been drafted by DWM in 1787, it hasn't sat in a DWM museum since then.  Dozens of states with live voters subsequently chose to accede to it, including, within living memory, Alaska and Hawaii, states with sizable non-white voting populations.  Should Puerto Rico be afforded the opportunity to become the 51st state and accept, the point will be reinforced.  Similarly, nine separate amendments have been ratified since women began voting, including the poll tax ban, which removed an impediment on African-Americans voting, and the amendment extending the franchise to persons between 18 and 21, many of whom are still living.  

Second, in order to become a "government official", one has to take an oath that says something about upholding the Constitution.  So, unless Seidman means for "Constitutional disobedience" to extend to lying to the people who elected you, it's "remotely rational" to expect the official to live up to that oath, especially since the only reason he or she gets to become "a government official" in the first place is a process set up by that "downright evil" Constitution.   

But let's suppose Seidman solves that problem by dispensing with any oath, or reference to the Constitution in it; let's suppose that, instead,  government officials just have to swear to engage in "careful study", which is the only other requirement he seems to envision for government action.  Well, it isn't just "white, propertied men who have been dead for two centuries " who "might disagree" with the particular decision of a particular government official (and I'll ignore the ad hominem argument that "they liked slavery too" because, however revealing it is of his lack of intellectual rigor, it's too tangential to the point).  Because, if dead people were the only opponents, his hypothetical government official could easily get the Constitution amended to approve the desired course of action.  The problem is that there are likely lots of other government officials, and equally likely lots of ordinary citizens, who don't agree with the course of action.  And there needs to be a mechanism for resolving that disagreement. 

Seidman doesn't offer any guidance on what that mechanism should be.  In fact, his op-ed is completely incoherent on mechanisms, which are much of what the Constitution is about.  In his second paragraph, he scorns the role of the legislative branch in fiscal matters:  "Why should a lame-duck House, 27 members of which were defeated for re-election, have a stranglehold on our economy? Why does a grotesquely malapportioned Senate get to decide the nation’s fate?" But, in the middle of his piece he allows not only that " ... Congress should consist of two houses. Some matters are better left settled, even if not in exactly the way we favor” but also that "Congress might well retain the power of the purse, but this power would have to be defended on contemporary policy grounds, not abstruse constitutional doctrine.".   So is it OK or not for a "lame duck House" and a "grotesquely malapportioned Senate" to control the fisc on "contemporary policy grounds"? (Which, as far as I can tell, are the principal grounds they've been debating). His view seems to vary from paragraph to paragraph.  But if it is OK, then it's his snarks about "lame duck" status and apportionment that are the "abstruse points". 

But it's not only his perspective on the legislative branch that is incoherent.  Regarding the Supreme Court, he tells us that one benefit of ignoring the Constitution is that "The Supreme Court could stop pretending that its decisions protecting same-sex intimacy or limiting affirmative action were rooted in constitutional text."  Ignoring for the moment the "have you stopped beating your wife" frame-up of the Court's decisions, the larger fallacy in this statement is: if you've eliminated a requirement that government officials obey the Constitution, what would bring any of those questions before the Supreme Court in the first place?  They only come before the Court because someone makes a claim that the Constitution limits what government officials can do. If it doesn't, the Court has no role to play.

And when he gets to the executive branch, Seidman pulls off a triple play of incoherence, stating on the one hand that "Nor, finally, should we have an all-powerful president free to do whatever he wants. Even without constitutional fealty, the president would still be checked by Congress and by the states" and on the other that "The president would have to justify military action ... solely on the merits, without shutting down the debate with a claim of unchallengeable constitutional power as commander in chief."  As a matter of historical record, I can't recall an occasion when a President (a) failed to claim that his military action was justified on the merits, but (b) "shut down debate" with a claim of unchallengeable power.  Seriously, how far could a President get in the court of public opinion saying "I don't have to convince you this is the right decision, I can do this whether you or not it is."  This is just another straw-man.  But even as a matter of logic, it's as incoherent as anything else.  Without "Constitutional fealty", what enables Congress to "check" the President?  The predicate assumes away the source for their power to "check" the President.  

And, even within the Constitution, I don't know what he is talking about when he suggests "the states" check the exercise of Presidential power. I can't think of a single government action that requires states to act as a predicate to Presidential action, or give states a veto over Presidential action.  The whole subject of resolving federal  / state conflicts, a gigantic aspect of the Constitution, goes unmentioned.

Seidman urges that the Constitution should be "aspirational" without much explanation of what that means.  For example, he doesn't explain how doing so would result in less "inflamed public discourse".  When politicians debate alternative courses of action that are clearly Constitutional, such as different bills on tax policy, the "public discourse" is hardly less inflamed.  And he totally ignores how government officials would resolve conflicts between two opposite "aspirations".  Often the response from Constitutional scholars who share his viewpoint is "the electoral process".  But that would produce outcomes that many would find intolerable.  For example, in the civil rights era, duly elected state officials strenuously resisted the desegregation orders of unelected federal judges.  So if "the electoral process" were the tie-breaker between competing aspirations about the Constitution, the South might well have remained segregated; indeed, there would be no basis for the federal courts to have become involved at all if the Constitution were not binding on elected state officials.

Seidman might respond by positing that certain provisions of the Constitution, such as those that limit racism, should remain in force.  But then his position boils down to a rationalization of his personal preferences as opposed to something more comprehensive template for running a government, as an enduring nation requires.

Seidman also notes that other countries do not maintain a written Constitution, for example, the UK.  But the UK also has a monarchy and, while he clearly wants to repudiate the actions of 1787, I don't sense he wants to go back even further and restore a monarchical regime in the US.  That may sound flip, but I think there is an important point to be made.  To maintain the social cohesion that is essential to have a nation, nations tend to have a central reference point for their particular identity, what defines what it means to be that nation as opposed to something different.  That identity almost always derives from the nation's founding or some other epochal event in its history.  In the UK, the monarchy serves that purpose, even if its government has defined itself by its separation from the monarchy over the past millenium.  France,  Russia and China have their revolutions and the rhetoric of the revolutionary leaders.  These are very similar to how the major religions define themselves, harking back to a single historical moment, when something divine or quasi-divine happened, to which both the leaders of the religion and its many members refer to establish a coherent religious identity.  In the highly secular and ethnically diverse US, the Constitution serves a similar purpose as a principal point of reference for national identity and cohesion. 

Seidman winds up his op-ed with a lament that if we continue to be bound by the Constitution, "we have to give up on the claim that we are a self-governing people who can settle our disagreements through mature and tolerant debate"  which is pretty sanctimonious from a guy who calls the Constitution "downright evil".  While there is plenty of immature and intolerant debate in the nation, it's hard to think of a more "mature and tolerant debate" than a Supreme Court argument on a Constitutional issue. If anything, arguing about the Constitution implies a common bond to it. 

I wouldn't write a Constitution today as the Constitution is written.  I imagine few would.  But I doubt my or anyone else's vision of a perfect replacement will ever take its place. As a practical matter, what Churchill said of democracy, that it is the worst form of government except for all the others, is probably fairly applicable to the Constitution as well.