EconoMonitor

Do New Laws and Budgets Automatically Supercede Old Laws and Debt Ceilings? A Legal Q&A

RGE Senior Manager of Research David Nowakowski sits down to discuss how new legislation is reconciled with older laws with attorney David Mollow, presenting implications for the debt ceiling, government borrowing and trade law.

Nowakowski: If a law is passed that contradicts existing law, but does not directly make a reference to the current law being amended, does the new law always supersede the old? Is there a legal name for this principle? For example, Congress passes a law that says, no meat may be eaten during Lent. Then a year later, they pass a law (not a constitutional amendment) stating “The right of the people to keep and eat bacon is hereby established and protected.” I would say that means you can eat bacon during Lent. If the chronology were reversed, then no bacon til Easter.

Mollow: The new law will trump the old one if that was clearly the legislative intent; the term “amend,” which you use, is correct. It is sometimes said that the old law or statute has been effectively repealed by the new law. In many situations, a court will find a way to infer an exception to or exemption from the old law, rather than strike it down entirely. The court can look quite carefully at the language of both statutes and sometimes at the legislative history, and can apply a number of canons of statutory interpretation to both laws. If the legislative intent is unclear, then things can get more confusing. In practice, the courts in these kinds of circumstances are really likely to base their determinations, with or without saying so, on public policy considerations, aka politics.

A well-known instance of your question arose after Congress enacted the National Labor Relations Act of 1935 and other labor laws. Courts had to decide whether the labor laws trumped the Sherman Antitrust Act of 1890, which generally prohibited contracts in restraint of trade. The antitrust law did not have an express exemption for labor organizations. But it seemed that Congress would not have enacted the labor laws in the absence of an intent for unions to be exempt from the Sherman Act’s prohibition, for such an exemption was necessary if unions were to engage in collective bargaining. So a real conflict existed there, and as a general matter the courts ended up finding implied exemptions to the antitrust laws. See, e.g., United Mine Workers v. Pennington 381 U.S. 657 (1965); Meat Cutters Local 189 v. Jewel Tea Co., 381 U.S. 676 (1965).

Nowakowski: What about the budget ceiling debate? Isn’t the ceiling the “old law”, while the budget, which tells the government what to spend and what revenues it can raise and how, is the “new law”, which arithmetically forces borrowing to be the difference, even if the budget doesn’t make that explicit?

Mollow: I don’t think so. Though as a practical matter the two laws may “arithmetically force” the borrowing, as a conceptual matter they do not, because cutting spending to bridge the chasm is logically possible, as is default. A law capping the debt ceiling and a later law mandating certain expenditures therefore do not seem to me to constitute a true—i.e., substantive—conflict between two federal laws. My sense is that Congress really has to explicitly raise the ceiling in order for the spending to be lawful. I don’t see a compelling argument that the new budget supersedes the debt ceiling, meaning that the latter has already been effectively repealed by Congress. One problem with an argument along those lines would be that if Congress had intended to repeal the “old law” it could have said so explicitly in the “new one”; a related problem is that extensions of the debt ceiling have occurred historically as independent legislative action. I think that it would be hard to argue persuasively that such actions were essentially superfluous, that Congress could have accomplished the same result by simply enacting spending legislation.

Nowakowski: Turning from federal law to constitutional issues: is section 4 of the 14th amendment relevant to this debate? Given the amount of interest and the size of the deficit, if the government can’t borrow more because it is at the legal limit, will it be forced to default, eventually?

Mollow: Regarding the Fourteenth Amendment, I don’t think so, though some commentators (e.g. Yale’s Balkin) have suggested that it could be relevant. The Fourteenth Amendment—ratified in 1868, shortly after the Civil War—provides: “The validity of the public debt of the United States. . . shall not be questioned.” So the argument has been raised that President Obama could spend by executive order on the basis of this language. This is a novel argument, as I understand it, and one that I do not expect to see taken very seriously; apparently the White House has made clear that it does not intend to invoke this expansive view of executive power under the 14th Amendment.

And yes, under the hypothetical circumstances you specify default would be conceptually possible, as would slashing popular government programs. Neither of these arithmetical solutions would be politically plausible, though. I therefore really expect to see the Republicans cave (it may be that many of them are grandstanding to demonstrate to constituencies that their interests are being represented to the extent possible) and simply increase the ceiling. If the political conflict proves to be especially intractable, it is possible that there will be a brief selective default limited basically to entitlements (i.e., not bonds), and that the unpleasantness this entails will then force a deal, as a crisis or the appearance of one can sometimes be necessary to clarify the real political interests and their relative strengths. Default beyond this limited kind does not strike me as a realistic possibility as it would not serve the interests of any major political constituency and has not been foreseen by the bond markets.

David Mollow practices law in New York and Massachusetts. He received a J.D. from Columbia Law School in 1999 and a B.A. in history from Tufts University in 1994.

David Nowakowski is RGE’s senior director of research.

10 Responses to “Do New Laws and Budgets Automatically Supercede Old Laws and Debt Ceilings? A Legal Q&A”

SchofieldJanuary 21st, 2013 at 10:19 am

"The Fourteenth Amendment—ratified in 1868, shortly after the Civil War—provides: “The validity of the public debt of the United States. . . shall not be questioned.” So the argument has been raised that President Obama could spend by executive order on the basis of this language. This is a novel argument, as I understand it, and one that I do not expect to see taken very seriously"

As a "novel argument" it demands to be taken seriously both economically and legally from a Constitutional viewpoint because it raises the issue as to whether the United States Federal Government should on behalf of The People pursue "Functional Finance" or "Arbitrary Finance."
http://en.wikipedia.org/wiki/Functional_finance

MaryMay 22nd, 2013 at 11:06 pm

I'm taking up law and I learned so much from above discussion. Not only did law principles and theories were discussed but what interest me more is the fact that concepts were practiced through application. It is always the best to learn from the expert.

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