This CRS report from early June discusses a number of legal and policy issues (not including the Public Debt Clause) that would arise should Congress not raise the debt limit. Of particular interest is its discussion of the Treasury Secretary’s authority to prioritize payments once the debt limit is reached:
Some have argued that prioritization of payments can be used by Treasury to avoid a default on federal obligations by paying interest on outstanding debt before other obligations. Treasury officials have maintained that the department lacks formal legal authority to establish priorities to pay obligations, asserting, in effect, that each law obligating funds and authorizing expenditures stands on an equal footing. In other words, Treasury would have to make payments on obligations as they come due. With regard to this view, Treasury recently noted that an attempt to prioritize payments was “unworkable” because adopting a policy that would require certain types of payments taking precedence over other U.S. legal obligations would merely be a “failure by the U.S. to stand by its commitments.”
In contrast to this view, GAO wrote to then-Chairman Bob Packwood of the Senate Finance Committee in 1985 that it was aware of no requirement that Treasury much pay outstanding obligations in the order in which they are received. GAO concluded that “Treasury is free to liquidate obligations in any order it finds will best serve the interests of the United States.” In any case, if Treasury were to prioritize, it is not clear what the priorities might be among the different types of spending.
While the positions of Treasury and GAO may appear at first glance to differ, closer analysis suggests that they merely offer two different interpretations of Congress’s silence with respect to a prioritization system for paying obligations. On the one hand, GAO’s 1985 opinion posits that Congress’s legislative silence simply leaves the determination of payment prioritization to the discretion of the Treasury Department. Conversely, Treasury appears to assert that the lack of specific legislative direction from Congress operates as a legal barrier, effectively preventing it from establishing a prioritization system.
The missing piece of this analysis is the constitutional issue. If one believes, as some do, that the Public Debt Clause prohibits default on the “public debt,” then the President is required to prioritize those payments that fall within that constitutionally protected category. This is Jack Balkin’s conclusion.
Personally, I am skeptical that the Public Debt Clause, of its own force, requires the President to do anything, other than not to repudiate or renounce the public debt (which he would lack the authority to do anyway). However, there is a plausible argument that the constitutional principle recognized in Perry v. United States requires that the public debt be repaid in accordance with the terms on which it was borrowed. This would be an extension of Perry’s reasoning, but a plausible one. If that is the case, then the President would be obligated to interpret congressional silence in accordance with this constitutional principle. At the least, the avoidance of constitutional doubt would seem to counsel for an interpretation of the statute that allows for prioritization.