By Jonathan Movroydis

In this Q&A, senior fellows John F. Cogan and Michael McConnell discuss the US Supreme Court amicus brief they filed, along with scholars Christopher DeMuth and Peter Wallison, in Biden v. Nebraska, in which Nebraska and a number of states challenge the constitutionality of President Biden’s decision to forgive more than $400 billion worth of federal student loans taken out by 43 million Americans.

Providing relevant historical examples, Cogan and McConnell argue that the Biden administration’s action is an encroachment of Congress’s sole authority over the “power of the purse” (the appropriation of money) as defined by the US Constitution. The scholars contend that the administration has distorted the meaning of the HEROES Act of 2003 to provide the legal justification for student loan forgiveness. Moreover, they explain that the White House itself has acknowledged that the cancelation of this debt will add $400 billion to the federal deficit.

Cogan and McConnell underscore that, unlike other parties in the Supreme Court case, their argument doesn’t rest on the major questions doctrine, which declares that for issues of major national significance, an executive action must be supported by clear statutory authorization. The Hoover senior fellows argue that the issues in the case are uncomplicated and don’t need to be tangled up in such controversial legal theories. There is no vagueness about who possesses the power of the purse. It is clearly the domain of Congress, they maintain.

Why, as you write in this amicus brief, is President Biden’s decision to forgive $400 billion worth of student loans an epochal change in the history of United States domestic programs?

John Cogan: Throughout the 2020 presidential campaign, then candidate Biden proposed to forgive student loans. During President Biden’s first year and a half in office, Congress considered numerous proposals for loan forgiveness, none of which passed. And at the time of these debates, few people thought that the president had unilateral authority to forgive personal debts. In summer 2022, however, the administration claimed that it had such authority from Congress by resurrecting and reinterpreting a twenty-year-old law called the 2003 HEROES Act, which was designed primarily to provide financial assistance to active duty military and members of the national guard economically impacted by  war, other military operations, or national emergencies.   

The president’s action has created an enormous expenditure. To provide some context, the national school lunch program, which serves thirty million students in elementary, middle, and high schools across America, costs $13 billion a year. That cost is just 3 percent of the Biden administration’s student loan plan.

Michael McConnell: And the HEROES Act was specifically intended for people who were pulled out of their regular jobs—such as dentists, electricians, truck drivers, and others—to serve on surprise deployments in Iraq and Afghanistan in the early 2000s. The bill didn’t even cancel these people’s student loans. It was just supposed to give them breathing space so that they would not be bankrupted for defaulting on loans that they couldn’t pay while they were fighting for their country.

John Cogan: To Michael’s point, the HEROES Act specifically says that the relief would be provided to affected individuals, that is, those who have suffered direct economic harm primarily from war or military operations,. The Biden loan forgiveness plan offers assistance, as we said, to 43 million people, far more than the entire number of people who serve in the armed forces. The law also allows relief for persons suffering direct economic harm from national disasters. The Biden administration reinterprets the law to apply to virtually all individuals who had student loans outstanding during the COVID-19 emergency. Hence, the forgiveness program goes far and beyond by providing assistance to people other than those who could accurately be considered affected individuals.

Michael McConnell: If you were to go down the list of various types of people who were directly affected by the COVID-19 pandemic in rank order, college graduates would not be anywhere close to the top. In fact, all the evidence indicates that the average college graduate makes more money than someone without a degree. College graduates were least affected by COVID-19. During the pandemic, most of them worked in front of a computer without having their livelihoods disrupted. The people who were really affected were those whose job duties required them to show up to the workplace. These include construction workers, service workers, house cleaners, and others. COVID-19 devastated their ability to earn an income. But they get no help from this loan forgiveness program.

Why do you believe student loan forgiveness violates the US Constitution?

Michael McConnell: The Constitution in two separate places gives Congress the authority to spend. Article I, Section 8 grants Congress the power to use tax revenues to provide for the common defense and general welfare. None of that power was given to the president. Taxing and spending is exclusively Congress’s domain. And even if that’s not enough, Article I, Section 9, Clause 7 specifically articulates that no appropriations can be drawn from the Treasury except pursuant to law, where law means an act of Congress.

So, the framers of the Constitution were doubly emphatic that the power of the purse was to be held by Congress. This power has also been reinforced by statutes passed by Congress, including a law that says that the executive branch cannot treat statutes as an authorization for spending unless it is specified as such.

John Cogan: What Michael said is very important. Whether you agree or disagree with the wisdom, or lack thereof, of the president’s loan forgiveness action, the central issue is for us is the constitutional one of the power of the purse.

Michael McConnell: In our brief, we tried to communicate our argument in a bipartisan context. We provide examples of four prior presidents, Republican and Democrat, who infringed on authority that is solely the domain of Congress. Like Biden with his student loan proposal, these presidents used snippets of congressional statutes, twisted them out of their context and original meaning, and subsequently spent large sums of money. In one of those cases, the courts blew the whistle and told President Obama he couldn’t bypass Congress by authorizing the Treasury to reimburse insurers participating in Affordable Care Act exchanges.

John Cogan: To add to Michael’s example, during the financial crisis of 2007–8, President Bush wanted to use federal funds to bail out General Motors. Congress had not authorized any funds for that specific purpose, but it had enacted a general grant of appropriations to assist financial institutions. So what did President Bush do? He declared General Motors to be a financial institution, and $14 billion of taxpayer money was sent GM’s way.

Similarly, President Trump, during the COVID-19 crisis, wanted to use Federal Emergency Management Agency, or FEMA, funds to provide unemployment compensation to individuals. The FEMA statute was very broad. It provided for all kinds of services to be provided to individuals suffering from national disasters. Clearly, COVID-19 qualified as a national disaster. But the law did not give the president the authority to help people make up for lost income.

For several decades, we have seen gradual encroachments by presidents on Congress’s power of the purse. It is a cause for very significant concern. This current court has the opportunity to stop further encroachments with a specific ruling on the Nebraska case.

Michael McConnell: White House lawyers may have been reluctant to push executive power too far because they know they can get into trouble. But if the case reaches the Supreme Court and the majority of justices rule in favor of the executive branch, that victory would be a green light for future presidents to encroach further on legislative power. What we have seen in the past has been bad enough. It’s an occasional abuse. But such overreach likely will become business as usual if the Supreme Court doesn’t do something about it.

How would encroachments on Congress’s spending power differ from other instances when the executive branch has violated the separation of powers doctrine?

Michael McConnell: In the regulatory area, the executive branch has often expanded its power beyond the limits of the Constitution, in my opinion. But spending is, in a sense, a more important issue, because the power of the purse is so central to the separation of powers. Yes, the Constitution gives Congress the power to regulate commerce. And when the president distorts statutes to make and enforce regulations, that is obviously wrong. I think it’s illegal. I think it’s unconstitutional. But in the spending area, the Constitution is meant to be especially airtight. No appropriations can be drawn from the Treasury except by law. There is no such provision with respect to regulation.

Your brief provides a history lesson about the power of the purse, going all the way back to seventeenth-century Britain. Will you describe why the American founders believed that this power was integral to the constitutional order?

Michael McConnell: The framers were acutely aware of British constitutional history. If you read the debates at the Constitutional Convention in 1787 (of which records are limited), there are innumerable references to British history. They knew Britain was transforming from an absolute monarchy to a constitutional monarchy, in which Parliament would emerge as the dominant force in politics. This process was unfolding even as the founders were writing the US Constitution. How did that happen? It largely happened because dating back to the Magna Carta in 1215, Parliament had control over taxation.

For hundreds of years after the Magna Carta was established, Parliament authorized taxation, but the Crown still decided how that money would be spent. In the late seventeenth century, Parliament began to say, “We’re not going to give you this money without strings attached. We’re going to tell you how to spend it.” And by the time the US Constitution was ratified, the Crown had lost its ability to spend money except pursuant to budgets and appropriations passed by the Parliament. From the framers’ perspective, this was the way to contain a potential tyrant, and they were determined to make sure that those lessons were passed on to future generations.

John Cogan: One of the examples that we use in the brief concerns King Charles I and his battles with Parliament over taxation and spending in the late seventeenth century. When he wanted to tax and spend without Parliament’s authorization, he reached back to a fourteenth-century law to provide his legal justifications. In some sense, his behavior was fundamentally no different from that of modern American presidents who have reached back far into the past for laws to justify their actions.

In your brief you talk about how presidents have refused to spend funds that have been authorized by Congress, a concept called “impoundment.” Is it constitutional for the president to impound funds?

Michael McConnell:  Presidents, going back all the way to Thomas Jefferson, have occasionally not spent all the money appropriated. They interpreted appropriation statutes as ceilings but not as spending mandates. But when they did so, it was because the expenditure had become unnecessary due to changing circumstances. For example, say the government had an appropriation for $10 million to construct a building, and the project was completed under budget for $8 million. The remaining $2 million was returned to the Treasury, and everybody would clap and be pleased.

Richard Nixon was the first president to use this ostensible authority of spending less than the appropriation for political and ideological objectives that Congress had not endorsed. And so there were a number of these impoundments that he made after his vetoes on spending were overridden by Congress. And when he chose not to spend, it was not in service of congressional objectives but rather in flat opposition to them.

Presidents will in many cases exploit ambiguities in the law to serve their political interests. The practice in the last several administrations has been very similar to Nixon’s impoundment policy. That is, whatever leeway there may be in statutory interpretation is now being used to counter congressional objectives. Congress considered something like eighty bills to remove the student loans and voted them all down, and then President Biden went and did it anyway.

Is impoundment lawful if it is congruent with congressional objectives?

Michael McConnell: Well, actually no, because what Congress did after Nixon attempted impoundment was to slam the door shut on this type of executive action. They said no more impoundments, period. It wasn’t just a matter of telling the president to wield this power carefully. Congress actually said that impoundments can only be made if the House and Senate passed a resolution that rescinded a specific appropriation. So when Nixon took impoundment too far, presidents lost that tool altogether.

John Cogan: And the executive branch did not lose impoundment authority just with respect to Congress; Nixon attempted  to defend the executive’s power to impound funds in numerous law suits and lost all of them in court. The Supreme Court decided to hear only one of these cases and also ruled against Nixon.

Michael McConnell: That’s right. There were 160 suits, and 159 of them went against the Nixon administration. But then in 1974, Congress just put an end to it.

John Cogan: This was a clear declaration both in Congress and in the judiciary that the power of the purse rested with Congress. This case represented the other side of the coin, if you will, involving spending less than what Congress has provided.

What about the argument of the Biden administration that student loan forgiveness isn't an issue of the power of the purse? It is in the name of the program: loan forgiveness, not spending.

John Cogan: From a legal perspective, loan forgiveness is no different than a direct grant of assistance to individuals. Both require a specific authorization through an appropriation by Congress. A loan program authorizes government agencies to issue payments to individuals and collect repayments. Congress often gives the executive branch a broad authority as to how to design the repayment scheme. A grant on the other hand, requires no repayment. What distinguishes the two is the repayment requirement. When the president waives the repayment requirement, he thereby converts that loan to a grant. From a legal perspective, an appropriations perspective, and a constitutional perspective, there really is no difference between giving and then forgiving a loan and giving an individual a direct grant of assistance.

Michael McConnell: As we wrote in our amicus brief, Congress passed a statute specifically about the authority to modify loans. The law says that modifying outstanding direct loans shall constitute new budget authority, which is to say a new expenditure. Think about your own family budget. If you made a loan to your sister-in-law and decide to forgive her loans, that is still money out of your pocket. You have made an expenditure.

For that reason, the Congressional Budget Office scored the student debt cancellation as an addition to the deficit. And if it weren’t for this program, there would be no debt limit crisis, or at least we wouldn’t reach that ceiling for several more months.

John Cogan: The Biden administration has treated it exactly the same way. So, both the executive branch that implemented the policy and the legislative branch have agreed that the action of forgiving a loan constitutes an appropriation and an expenditure.

How does your amicus brief differ from that of the respondents (State of Nebraska et al.) and other parties filing amicus briefs?

Michael McConnell: Most of the briefs, including the respondents’ brief, rely on what is called the “major questions doctrine.” This is a new and highly controversial idea, and it means that if there is a major issue before the government (such as student loan forgiveness), then the courts should depart from its ordinary principles of statutory construction and of the non-delegation doctrine. This reasoning has become more common in the federal judiciary in the last few years. It may be right, but it is something on which serious people disagree.

We don’t believe this case rests on the major questions doctrine. When the Constitution itself says that all appropriations must be authorized by law, and when Congress itself has said that modifications of loans are equivalent to expenditures, we don’t need a major statement, doctrine, or any other fancy footwork. This is just a very straightforward matter of how to interpret appropriations law.

John Cogan: Michael’s making a really important point here. The major questions doctrine is a fairly recent idea. And the dividing line between major and minor questions has yet to be decided by the court. The justices have only asserted that a different standard is to be applied to major issues. Our argument is based on a very clear constitutional issue. There’s no vagueness about the power of the purse and where that line is drawn between the president’s authority and Congress’s authority. Therefore, we think that we are making a much more viable and effective argument.

Expand
overlay image