Go Ahead, Buy the Obama Bond
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With the federal government partly shut down and the footsteps of the debt ceiling clomping closer, the search is on for worst-case, last-gasp, what-if-we-have-to-ram-the-asteroid solutions. The latest of these is the “Presidential bond,” a.k.a. the “Obama bond,” a.k.a. this year’s answer to 2011′s trillion-dollar coin.
This is a bond issued by the president unilaterally, without congressional authorization, to make sure the U.S. doesn’t default on its debt. The problem with this bond is that the president doesn’t have the authority to issue bonds without Congress, which is why we’re looking ahead to a debt ceiling showdown in the first place.
You might think this would be a deal-breaker for such a resolution, except for the fact that while everybody agrees the president doesn’t normally have that authority, he or she does have the authority to do the things that are demanded of him or her by the Constitution. And one of those is paying the nation’s debts, thanks to the 14th Amendment, which specifically enjoins the government from defaulting.
The most thoroughly argued case in favor of the president issuing bonds to roll over the U.S. debt and breach the debt ceiling comes from legal scholars Neil Buchanan and Michael Dorf. They call doing so the “least unconstitutional” of the president’s options should the debt ceiling not be raised. The legal case for this is tenuous; Fortune‘s Roger Parloff offers an illuminating discussion, if you want to get into the details. Still, if the shutdown bleeds into the Oct. 17 debt ceiling deadline, a lot of folks will be on the hunt for even tenuously legal solutions.
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