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Thursday, May 04, 2023

The Robert Moses Theory of Law

In Robert Caro's masterpiece The Power Broker, he quotes Robert Moses as telling associates: "Once you sink that first stake, they'll never make you pull it up." This is an fine aphorism for sunk-cost thinking on any project, but also describes how courts respond to some cases.

Consider the following scenario. Assume that President Biden decides to ignore the debt ceiling. A lawsuit is filed challenging that action. Assume further that someone has standing to bring that case. What would happen on the merits?

A significant limitation on judicial power would be that a ruling against the Administration could cause a financial panic. Bonds issued after the debt ceiling was broken would be illegal and worthless. These losses would spill over into banks, pension funds, and so on. Put another way, once the first "Biden bond" is issued, they'll never make you pull it back.

This is part of what happened in 1935. The Supreme Court faced the real prospect that there would be a financial meltdown if they ruled against the Roosevelt Administration's position in the Gold Clause Cases. Devaluation was a fait accompli.

This will be my last Section Four/debt ceiling post unless something actually happens.  

Posted by Gerard Magliocca on May 4, 2023 at 06:17 PM | Permalink


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