Lessons That the 16th Amendment Can Teach Us About The 14th
With the agreement last week between House Speaker Kevin McCarthy and President Joe Biden, ratified by the House and Senate, the latest imbroglio over the debt ceiling has, for the moment, been put to bed. But one issue, raised by Democratic lawmakers as a means of circumventing the impasse, was not – whether the President has the Constitutional power under the 14th Amendment to exceed unilaterally the debt limit imposed by Congress by borrowing, on his own authority, further funds.
Invocation of the 14th Amendment was widespread. Certain members of Congress, including Alexandria Ocasio-Cortez, Ilhan Omar, Bernie Sanders, and Elizabeth Warren, expressly called upon President Biden to ignore the debt ceiling, to bypass Congress, and to order the Treasury Department to issue new debt to cover any revenue shortfall. Cover for this proposed course of action was most prominently provided by Professor Laurence Tribe of Harvard Law School who, having in an earlier article published in the New York Times argued that the President lacked the power to issue debt, more recently wrote that he “had changed his mind.”
This is not the first time in American history that Constitutional issues have risen to the fore in budget disputes over spending. Prior to the enactment of the 16th Amendment in 1911, which expressly authorized the United States government to levy an income tax on individuals and corporations, an income tax had been held by the Supreme Court to be unconstitutional. Numerous politicians, including William Jennings Bryan, in his presidential campaign of 1896, nevertheless called for the imposition of such a tax. An examination of the current debate, and the debate in 1896, illustrates how politics can affect a person’s view of what is constitutional.
The Current Dispute: The Debt Ceiling and the 14th Amendment
To the extent most Americans are familiar with the 14th Amendment, it is due to the first section of that provision, which provides, in part: “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the state wherein they reside.” However, the provision addresses other issues that arose as a result of the resolution of the Civil War. In that regard, Section 4 of the 14th Amendment provides, in pertinent part:
“The validity of the public debt 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.”
According to Professor Tribe, and others who argue that this Amendment empowers the President to ignore the debt ceiling, when Congress authorizes spending without, at the same time, authorizing sufficient revenue to pay for it, it cannot limit the President from spending the amount authorized, even if that means borrowing funds without the approval of Congress. According to Professor Tribe, it is the duty of the United States and the President, pursuant to the 14th Amendment, to “pay all its bills as they come due, even if the Treasury Department must borrow more than Congress has said it can.”
Those on the other side, including Michael W. McConnel, Professor at Stanford Law School and former judge of the 10th Circuit Court of Appeals, have argued that the suggestion that the 14th Amendment authorizes the President to issue debt on his own authority is “Dangerous Nonsense.” They base their argument on other provisions of the Constitution that enumerate the powers of each of the branches of government, the history of the debt ceiling, and in the text of the Amendment itself.
First, as Professor McConnell argues, the power “to borrow money on the credit of the United States” is expressly reserved to Congress alone by Article I, section 8 of the Constitution. Nothing in the 14th Amendment even remotely affects that fundamental power. Nor did the enactment of the debt ceiling in 1917.
Prior to the enactment of that provision, Congress was required to authorize every issuance of debt by the United States. As government spending increased exponentially during World War I, this procedure proved cumbersome. Accordingly, as a matter of practicality, Congress pre-authorized the President to borrow funds, up to a certain amount, without coming to Congress in each instance. Thus, argues Professor McConnell, far from limiting the President’s power, the debt ceiling was (and is) actually an expansion of the President’s power to exercise discretion normally within the purview of Congress. By enforcing the debt ceiling, Congress is not limiting power that the President purportedly has; instead, it is merely refusing to grant him further power than that it previously gave him.
In a prior article published in the New York Times in 2011, Professor Tribe concurred with those views. In his latest article, he stated that he had come to his recent, contrary conclusion after reading an article whose title he chose to omit: -- How To Choose The Least Unconstitutional Option: Lesson for the President (and Others) From The Debt Ceiling Standoff. (Emphasis added) -- suggesting he still recognizes the unconstitutionality of his new proposed course of action.
Professor McConell posited a further argument in his article, one drawn from the language of the 14th Amendment itself. That language, in his words, has nothing “to do with payment of the national debt.” Instead, it only mandates that the “validity” of the debt is not to be “questioned.”
“For the United States to fail to pay interest or principal on its debt would be financially catastrophic, but it would not affect the validity of the debt. When borrowers fail to make payments on lawfully incurred debt, this does not question the validity of those debts; their debts are just as valid as before. The borrowers are just in default.”
The view of Professor McConnell is consistent with what all concede is the one decision of the Supreme Court to address the 14th Amendment’s debt provision, Perry v. United States, 294 U.S. 330 (1935). Contrary to what many have said, the United States did default on a promise contained in a $10,000 bond purchased by the plaintiff. The bond provided that payment was payable in “United States gold coin of the present standard of value.” The plaintiff alleged that, at the time he purchased his bond, gold coins had a present value of $16,931.25, and he rejected the proffered payment of $10,000 by the government. During the period after the plaintiff’s purchase, the government had repudiated the provision requiring the payment in gold dollars. A plurality of the Court deemed this repudiation unconstitutional. However, since gold coins had been removed from circulation, and there was no market (or market value) for them, the Court ruled that the plaintiff had not established that he had been damaged.
The plurality noted that, even if a plaintiff could establish that he had been damaged, he might not be entitled to establish his right to payment. Under the doctrine of sovereign immunity, the government could not be sued without its consent, and that, without such consent, the plaintiff would not be entitled to payment, even though the obligation would still exist, and would “remain binding upon the conscience of the sovereign,” if not its purse strings. The fifth Justice, concurring to form the majority, was much blunter in his opinion:
“While the government's refusal to make the stipulated payment is a measure taken in the exercise of th[e] power [“to coin money” and “regulate the value thereof.,”] this does not disguise the fact that its action is to that extent a repudiation of its undertaking. As much as I deplore this refusal to fulfill the solemn promise of bonds of the United States, I cannot escape the conclusion, announced for the Court, that in the situation now presented, the government, through the exercise of its sovereign power to regulate the value of money, has rendered itself immune from liability for its action.”
Thus, under Perry, validity of the debt was deemed to be separate from the right to enforce payment, as Professor McConnell suggests.
The Past Dispute: The 16th Amendment
For most of the 19th century, the American government financed its activities through a variety of means: tariffs, custom duties, federal excise taxes, and the sale of land. Taxation was limited because Article I, Section 9 provides, in pertinent part:
“No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or Enumeration herein before directed to be taken.”
The first case to address this provision was Hylton v. United States, 3 US 171 (1796), in which the plaintiff challenged, as violative of the above provision, a tax on carriages. The Court, influenced by the difficulty in apportioning a tax on carriages among the states – i.e., owners in a state with few carriages would pay a much higher tax than those in states where there were many -- held that it was not a direct tax, reasoning, in separate opinions, that it was a tax on the conveyance or expense of the carriage. This was the first case that, for practical and/or political reasons, limited the scope of what was a direct tax.
The exigencies of the Civil War prompted the enactment of the first income tax. It was a temporary measure, but was in force for a sufficiently long period for the Court, in Springer v. United States, 102 U.S. 586 (1880) to entertain a challenge to its constitutionality. The Court held that the tax did not violate Article I, Section 9 because it deemed an income tax not to be a direct tax, a notion that would be regarded as absurd today. The Court held that the only taxes that were direct were poll taxes and taxes on real property, effectively neutering the section at issue.
These decisions were of little immediate import because Republicans were committed to the system of tariffs and custom duties. These tariffs and duties benefited primarily industrialists in the Northeast and Midwest, who could most afford to pay taxes, and penalized farmers in the West and the South, who could least afford it. As the weight of the Republicans economic policies became, due to the so-called McKinley tariffs, excessively burdensome on farmers, agitation for an income tax became pronounced. Foremost among those agitating was William Jennings Bryan. With the reelection of Grover Cleveland, the government enacted a flat tax, proposed by Bryan, on those earning more than $4000. This tax was coupled with a reduction in tariffs.
The tax was almost immediately struck down by the Supreme Court in the case Pollock v. Farmers' Loan & Trust Co., 157 U.S. 429 (1895), which, effectively overruling Springer, held that an income tax imposed upon income from rents from real property was, in substance, a tax on land, and thus direct and unconstitutional. Pollock has been criticized for ignoring prior precedent, but no one seriously argues with its determination that an income tax is a direct tax.
The decision by the Supreme Court did little to quell agitation for an income tax, notwithstanding its unconstitutionality. William Jennings Bryan, successfully seeking the Democratic nomination for President in 1896, included an attack on the Pollack decision in his famous “Cross of Gold” speech at the convention:
“They say we passed an unconstitutional law. I deny it. The income tax was not unconstitutional when it was passed. It was not unconstitutional when it went before the Supreme Court for the first time. It did not become unconstitutional until one judge changed his mind; and we cannot be expected to know when a judge will change his mind.
The income tax is a just law. It simply intends to put the burdens of government justly upon the backs of the people. I am in favor of an income tax. When I find a man who is not willing to pay his share of the burden of the government which protects him, I find a man who is unworthy to enjoy the blessings of a government like ours.”
With the election of McKinley, a period of reaction set in. Republicans, who controlled both houses of Congress, restored many of the tariffs and laid to rest the idea of an income tax. However, McKinley was assassinated and replaced by Theodore Roosevelt. Although Roosevelt faithfully carried on McKinley’s policies through what would have been the remainder of the latter’s term, he charted a different course once elected in his own right. In particular, in his State of the Union address in 1906, Roosevelt expressly raised the issue of the income tax again:
“As the law now stands it is undoubtedly difficult to devise a national income tax which shall be constitutional. But whether it is absolutely impossible is another question; and if possible it is most certainly desirable. The first purely income-tax law was past by the Congress in 1861, but the most important law dealing with the subject was that of 1894. This the court held to be unconstitutional.
The question is undoubtedly very intricate, delicate, and troublesome. The decision of the court was only reached by one majority. It is the law of the land, and of course is accepted as such and loyally obeyed by all good citizens. Nevertheless, the hesitation evidently felt by the court as a whole in coming to a conclusion, when considered together with the previous decisions on the subject, may perhaps indicate the possibility of devising a constitutional income-tax law which shall substantially accomplish the results aimed at.”
No further progress was made on the income tax until the election of Taft. In 1909, he sought to lessen the burden of tariffs by raising the inheritance tax, but was stymied by conservative Republicans, led by Nelson Aldrich, who instead proposed new tariffs on a multitude of new goods. The severity of these proposed duties was the catalyst, at the instigation of Senator William Borah, for the union of moderate Republicans and radical Democrats in opposition. This union amended the proposed legislation in the Senate to provide for a new income tax. Borah defended the amendment, in language familiar to Progressives today, in the name of “equity.”
Fearful of a constitutional crisis, yet also opposed to many of the tariffs proposed by Aldrich, Taft sought to defuse the situation through compromise. He endorsed the idea of a constitutional amendment, thinking that the likelihood of such an amendment ever passing the Republican Congress and Republican state legislatures was minimal. To the surprise of most, the 16th Amendment, which gave Congress the “power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration,” was enacted, forever transforming the United States government.
Lessons from the Past
There are significant differences between the controversy over the income tax and that over the debt ceiling. To start, with respect to the former, there was a decision of the Supreme Court expressly ruling that the income tax was unconstitutional. At the same time, however, there was significant prior precedent supporting the proponents of the tax. In the present controversy, while there is no express decision rejecting Progressive’s arguments concerning the 14th Amendment, there is little to no authority to support them.
Notwithstanding these differences, the two controversies share some similarities. In each, progressive politicians sought to bend, if not ignore, express provisions of the Constitution to advance their agenda for policy reasons. Furthermore, they effectively challenged the Supreme Court to strike their agenda down, deliberately putting political pressure on the Court.
President Taft sought to temper the controversy by resort to compromise. President Biden sought to do the same with his concessions to Speaker McCarthy. However, President Biden’s compromise is not permanent, but merely short-term. It is likely that the issue of the debt ceiling will come again. With the partisanship at a boiling point today, it is less and less likely that a compromise will be reached, and more likely that a constitutional crisis will be provoked.
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