Bruce Bartlett argues that President Obama can ignore the debt limit and instruct the Treasury Secretary to sell whatever securities necessary to keep the federal government open for business, regardless of the actions (or lack thereof) of Congress later in May.
He argues this is necessary because not doing so would have such dire consequences:
The president would be justified in taking extreme actions to protect against a debt default. In the event that congressional irresponsibility makes default impossible to avoid, he should order the secretary of the Treasury to simply disregard the debt limit and sell whatever securities are necessary to raise cash to pay the nation’s debts. They are protected by the full faith and credit of the United States and preventing default is no less justified than using American military power to protect against an armed invasion without a congressional declaration of war.
Claims the President has Constitutional powers that trump statutory law in this case:
Furthermore, it’s worth remembering that the debt limit is statutory law, which is trumped by the Constitution which has a little known provision that relates to this issue. Section 4 of the 14th Amendment says, “The validity of the public debt of the United States…shall not be questioned.” This could easily justify the sort of extraordinary presidential action to avoid default that I am suggesting.
And that the use of 3 month securities mean investors will be repaid long before the Supreme Court decides the case, meaning interest rates will not likely rise too much under this option:
Some will raise a concern that potential buyers of Treasury securities may be scared off by a fear that bonds sold over the debt limit may not be backed by the full faith and credit of the United States. However, given that the vast bulk of Treasury securities are 3-month bills that will turn over many, many times before this issue ever reaches the Supreme Court, it is doubtful than anyone will be concerned about that. And the Federal Reserve could assure investors that it will always be a buyer for such securities.
Count me as not being a constitutional scholar, so I have no idea if this is an option. It would certainly be an interesting wrinkle.
Update: interesting post from the Atlantic on debt limit maneuvers, including a link from GAO on history of debt limit.