Oct. 1 (Bloomberg) -- President Barack Obama has neither the legal authority nor the practical ability to bypass Congress and extend the nation’s borrowing limit, and attempting such a step might trigger turmoil in the markets, two top White House advisers said.
National Economic Council Director Gene Sperling and Obama adviser Dan Pfeiffer were responding to some congressional Democrats who urged Obama to extend the federal debt ceiling without congressional authorization under the 14th Amendment to the U.S. Constitution.
Hours into a partial government shutdown resulting from a fiscal stalemate with House Republicans, administration officials and lawmakers are looking ahead to an Oct. 17 deadline for Congress to raise the $16.7 trillion federal debt limit.
Senate Finance Committee Chairman Max Baucus, a Montana Democrat, told reporters at the Capitol today that invoking the president’s powers under the 14th Amendment to raise the limit is “an option that should seriously be considered.”
House minority leader Nancy Pelosi said last week that she disagrees with Obama’s decision not to act unilaterally during a 2011 standoff over increasing the debt limit. “I would never have taken it off the table,” the California Democrat said.
White House lawyers don’t see that as an option, Sperling and Pfeiffer said today at a Bloomberg Government luncheon.
“Our folks have never found that there was such extraordinary authority,” Sperling said.
Pfeiffer said employing such a tactic is impractical.
“Would people buy bonds that are legally questionable?” he said. “If you were buying a car, would you ever buy a car when the title was in doubt? The answer to that question is no.”
“I don’t know why we would assume that investors would buy bonds that are legally in question, that could at any day be invalidated by a court,” he said. “So it is an impractical solution to the problem.”
Proponents cite the language of the 14th amendment, which says that the “validity of the public debt of the United States, authorized by law, including debts incurred for payments of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.”
Obama and his advisers have consistently rejected using the amendment to justify raising the debt ceiling without Congressional support.
“This is ultimately about whether the rest of the world, global investors, have confidence in this,” Sperling said. “The spectacle of auctions going off that are under a legal cloud would most likely have a lot of the same negative impact globally that people fear in an all-out default.”
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