As congressional debt-ceiling plans founder, eyes turn to executive option

After a derailed House vote Thursday night, congressional leaders are scrambling for support for competing ways to raise the debt limit before the nation’s borrowing capacity expires on Aug. 2 – including the prospect of doing the deed by executive power.

President Obama made no direct reference to the executive option when he addressed the debt-ceiling crisis on Friday morning, saying simply, "There are plenty of ways out of this mess, but we are almost out of time.” He called for bipartisan action and slammed the GOP plan that failed to pass Thursday night: "It does not solve the problem and it has no chance of becoming law.”

The stakes couldn’t be higher for Speaker John Boehner (R) of Ohio, whose leverage in negotiations with the White House depends on his ability to speak for and deliver a majority in the House.

House Republicans pulled their latest plan to resolve the crisis just minutes before a Thursday evening vote, after falling short in their vote count. The plan aimed to raise the debt limit by at least $2.5 trillion, but in two steps – an initial $915 billion in spending cuts to be followed by another $1.8 billion, negotiated by a bipartisan congressional panel.

The idea of revising such a divisive debate just months before the 2012 elections is a nonstarter for Democrats and the Obama White House, who say that the uncertainty will further damage a fragile recovery.

But GOP conservatives also balked at raising the debt limit without also requiring Congress to pass a balanced budget amendment. With House Democrats united in opposition, Mr. Boehner needs to win up to several dozen undecideds and at least two Republicans who are publicly committed to opposing a debt deal, according to whip counts shared with reporters.

It’s a tall order. Tea party groups and high-profile conservative organizations, such as the Club for Growth, are lobbying House Republicans, especially the 87-member freshman class, to not back down on campaign promises to oppose raising the debt limit.

Meanwhile, Senate majority leader Harry Reid (D) of Nevada is moving forward Friday night with a bill that proposes to settle the debt limit issue through 2012. The plan is expected to include many of the spending cuts in the Boehner plan, but also includes some $1 trillion in cuts related to winding down the wars in Iraq and Afghanistan. It also establishes a joint congressional committee to propose longer-term deficit reduction. Together, Democrats say, those $2.4 trillion in spending cuts justify raising the debt limit in a single vote – and a two-stage vote has no chance of passing the Senate, they add.

“This is a pretty good deal,” said Senator Reid, speaking from the floor Friday morning. “They should put the chips in their pockets and walk away with a victory. There will be no time to consider another bill in the Senate.”

But Senate minority leader Mitch McConnell (R) of Kentucky, who has been working with the majority leader on a range of options to resolve the crisis, blasted Democrats for not producing the plan.

“Rather than working these last few days towards a solution to this crisis the way the Republican majority in the House has, the Democratic najority here in the Senate has been wasting precious time rounding up `no’ votes to keep this crisis alive,” he said on the floor of the Senate on Friday. “Rather than being responsible and doing their duty and come up with a bill that can pass, they’ve been busy signing people up for the `not good enough’ caucus and ginning up opposition to everything else.”

The prospect of Congress failing to settle this issue in the time remaining is also reviving a controversial plan to invoke executive powers to ensure that the nation meets its debt obligations.

Treasury Secretary Timothy Geithner set off alarms across the political spectrum in May, when he invoked an obscure clause in the 14th Amendment – “the validity of the public debt … shall not be questioned” – in a meeting with reporters on the debt crisis. Treasury officials later clarified that the Secretary, in fact, saw the debt limit as a legal obligation.

But lately, Democrats are reviving talk that should Congress fail, there is a last-ditch, executive option.

“If nothing passes out of here and the president is sitting at his desk on Aug. 2 with no legislation, what should he do to make sure that the country doesn’t go into default?” asks Rep. James Clyburn (D) of South Carolina, the third ranking House Democrat.

“Every president has used executive power to do big things,” he adds, citing President Truman’s integrating the Armed Forces and President Eisenhower’s integrating public schools. Invoking the 14th Amendment would be a “defining moment” for the president, he added.

House minority whip Steny Hoyer (D) of Maryland said on Thursday that the president should use 14th Amendment to avoid default, if Congress fails to act. Citing President Clinton, he said: “Better to take the action and find out later that perhaps he went beyond his authority but at least protected the credibility of the United States of America.”

But critics say that such a resort to executive powers also tends to confirm fears in world financial markets that Congress in not able to set the nation on a sustainable fiscal course.

“Obama’s invocation of the 14th Amendment would broadcast the fact that the two elected branches were incapable of bringing outlays and revenues into better balance and incapable of lifting the debt limit, even when they were told repeatedly the danger to U.S. financial credibility, the damage to U.S. bond ratings, and the likely increase in interest rates across the board – further compounding the deficit problem and placing additional burdens on private citizens and the prospects of economic recovery,” says Louis Fisher, who recently retired as Congress’s top adviser on executive powers at the Library of Congress.

The protracted ligation sure to be sparked by use of the 14th Amendment would also have unintended and harmful consequences, he adds. “Throughout that lengthy and uncertain process, with the possibility at the end that the Court would either decide against the administration or rule that it has no jurisdiction, the economic health of the United States would be subject to regular and damaging blows,” he adds.