The debt ceiling and the Fourteenth Amendment

As rhetoric heats up about the debt ceiling (not to mention the indignity of being ordered to come to work on a weekend), a new talking point has emerged. This is very interesting – expect sputtering rage when the radio talkers retake the air on Tuesday morning. From the linked post at Crooks & Liars:

It’s an untested concept, but rooted in some really strong history. I cannot recommend this post enough for the backstory and history around the adoption of Section Four of the Fourteenth Amendment:

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

When I first heard about this I was completely confused as to how language about the public debt became part of a constitutional amendment, which is why you really must read the post on Balkanization. Here’s a snippet:

What do we learn from this history? If Wade’s speech offers the central rationale for Section Four, the goal was to remove threats of default on federal debts from partisan struggle. Reconstruction Republicans feared that Democrats, once admitted to Congress would use their majorities to default on obligations they did disliked politically. More generally, as Wade explained, “every man who has property in the public funds will feel safer when he sees that the national debt is withdrawn from the power of a Congress to repudiate it and placed under the guardianship of the Constitution than he would feel if it were left at loose ends and subject to the varying majorities which may arise in Congress.”

more from Jon Chait:

This means that the very existence of the debt limit is unconstitutional because it calls into question the validity of the debt. So would any other provision of law. That is a key reason why Congress created a permanent appropriation for interest payments at the same time that the Fourteenth Amendment was debated. Previously, Congress had to pass annual appropriations for interest.

Paul Krugman also had a word on the same subject yesterday.

UPDATE: I urge you to read the comment below by John Nail re a 1935 ruling by the Supreme Court on this very matter.

29 responses to “The debt ceiling and the Fourteenth Amendment

  1. Add this to the argument, The SCOTUS has clearly ruled on the issue of debt:
    PERRY V. UNITED STATES, 294 U. S. 330 (1935)

    The government’s contention thus raises a question of far greater importance than the particular claim of the plaintiff. On that reasoning, if the terms of the government’s bond as to the standard of payment can be repudiated, it inevitably follows that the obligation as to the amount to be paid may also be repudiated. The contention necessarily imports that the Congress can disregard the obligations of the government at its discretion, and that, when the government borrows money, the credit of the United States is an illusory pledge…

    The Constitution gives to the Congress the power to borrow money on the credit of the United States, an unqualified power, a power vital to the government, upon which in an extremity its very life may depend. The binding quality of the promise of the United States is of the essence of the credit which is so pledged. Having this power to authorize the issue of definite obligations for the payment of money borrowed, the Congress has not been vested with authority to alter or destroy those obligations.

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    • Hello John, and thanks for that citation. I think Krugman made the same point – the amendment basically requires good faith payment once debt is incurred. Congress borrowed the money. They can’t prevent the government from paying it.

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  2. Moe – this is clearly a last ditch option. The longer this plays out the stupider the Republicans look and Obama in his typical style is “rope a doping” them in for the kill. He does it every time and they keep comin back for more. They believe their own BS that he is weak etc and cannot get over a black man as President.
    I believe this will happen which will neuter the R’s ever again on this issue and likely cost Boehner his job as speaker. Cantor can’t wait
    Obama keeps playing the adult. Stays above this discussion completely and lets the surrogates go like he has in Schumer. The R’s keep pushing and “Bam” Obama acts and looks like the strong, decisive leader and gives up nothing. This will strengthen his hand for the real debt reduction work to be done. Also guarantee his re elect and likely gaining the House and keeping the Senate.

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    • Welcome HCR! I’d like to beleive that Obama is being as strategic as you suggest. When he was elected, I remember hearing from those who knew him that he “plays a long game”. He is clearly a patient man.

      As for the Repulbicans, it looks to me like this year their main occupation is the circular firing squad. !

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  3. Intelligent HCR ,

    You are right about a few things. President Obama is playing a smart political game. Cynical to the extreme . I would argue back that it is not leadership what he is doing . Some painful cuts are coming. It is a matter of who takes the blame for the pain of them .

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  4. And the R’s aren’t playing a total political game here? The blame will go to them if they don’t compromise. A great deal is on the table for them.

    Dealing with the debt – that has already been authorized by Congress this session and in the past – is not the President’s job, it is Congress’.

    I would posit that they are in violation of their oath of office in not handling this incontrovertible obligation and as I said above if they do not act Obama would be violation of his oath to uphold our laws and the Constitution.

    “I do solemnly swear (or affirm) that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same; that I take this obligation freely, without any mental reservation or purpose of evasion; and that I will well and faithfully discharge the duties of the office on which I am about to enter: So help me God.”

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  5. Intelligent HCR ,

    I don’t believe that you take our long term fiscal difficulties seriously . It is not just this year’s chance of default . Long term the United States is going off of a cliff. Go ahead, tax the rich . Go ahead, take all of their money. It is not even close to being enough . And as certain States are finding out, stealing from the rich is counter productive . Long term revenues go down .

    I posted this on another board . The model for us should be Canada . In the 1990s Canada was us . True they raised taxes, but for every $1 they raised, they cut $ 6 in expenditures . In 15 years they cut their national debt in half . And it was a center left Government that did it. Who knew that Liberals could be fiscal Conservatives ?

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    • [In the 1990s Canada was us] and in the 1990’s we were Canada.

      We fixed it then. But then guess hwat happened . . . ?

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    • Alan, I am going to interject here by mentioning that this particular economic feat was largely accomplished by rearranging the structure of the debt, not by reducing it in absolute terms.

      What Ottawa did to kill the deficit was reduce how much federal money and services were available to the provincial governments, especially in the area of public health. The provinces, in turn, gave more responsibilities(or “downloaded”) in the fields of health, infrastructure, and education to the municipalities.

      The arrangement worked out very well in the short term. But soon the provinces got lazy and downloaded more responsibilities to the municipalities than they could handle. It worked and would probably have continued to work had the provincial governments not gone overboard but they did, and now municipalities (even a city or two) across the country are flat stinking broke.

      Also, and one thing I don’t believe that you in particular would be especially keen on, is that the Liberal government also gutted the Department of National Defense to the point where our soldiers were wearing jungle camo in the early days of the Afghan mission, possessed rusting helicopters that sank faster than our subs would, and in general exposed the country to more American control because we became almost unable to defend our own sprawling territory.

      Ottawa’s “cuts” were well-crafted illusions.

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  6. This means that the very existence of the debt limit is unconstitutional because it calls into question the validity of the debt. So would any other provision of law.

    I’ve heard this too and have been thinking it over before I post on it. However, my thoughts.

    I suspect that the things means what it looks like it means; the President can “just pay” the damn debts. Which, in retrospect, seems right. We owe the money, we oughta pay on it.

    However, this is not a scenario that is unique to the current battle. Just a few years ago our very own Beloved Leader engaged in the same rhetoric that the Republicans are embracing. And before that, Clinton let the country shut down. And no one that I know of now is saying that he should have “just paid the bills.”

    the amendment basically requires good faith payment once debt is incurred. Congress borrowed the money. They can’t prevent the government from paying it.

    I think this is probably true. However, what I HOPE it means is that the Congress and the President are not authorized to create MORE debt.

    Pay on what we owe. Sin no more.

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    • That we ALWAYS borrow money to pay debts blows my mind. Economists seem to understand this and when times are good it’s appently the way things are done – in business and in government. Above my pay grade. Still blows my mind.

      Wasn’t the shut down in the 90’s over a budget? I seem to remember that Gingrich said he’d shut down the gov’t unless Clinton . . . I’ll have to wiki hte damn thing. My brain is broken tongiht.

      When the Congress raised the debt ceiling in Bush’s terms – 7 times I think – there was plenty of partisan rhetoric – Democrats wanted to raise taxes to pay for the wars, which we fought on borrowed money – but when push came to shove and the vote had to be taken, dozens of Dems voted for the measure. Today the Republicans are vowed to vote as a block against it.

      Anyway, it’ll be interesting to watch this play out.

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      • Something I find incredulous is that when an individual accumulates new debt to pay off old debt or the people who have “invested” in them, it is called a Ponzi scheme, but sovereign states seem to do this regularly and with little stigma attached?

        Whatever name it goes by, a Ponzi scheme is always doomed to collapse like the house of cards it is in the long run.

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  7. Ms. Holland ,

    ” in the 1990′s we were Canada.”

    Not quite . We were never Canada . I could argue that everything was rosy or peachy until 2007 when Pelosi came in . But even the lady of the west is not the problem .

    You will not accept this , but for the umpteenth time , we have a demographic entitlement time bomb . Taxing the rich, cutting the military , and making my kids wait until they are 95 to collect SS will not put a dent in it .

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    • I’m so sick of hearing about the poor mistreated rich people.
      Close the tax loopholes, return their rate to where it should be (and was),
      Trickle down is destroying America, period.
      Start there, then work entitlements, military, and every other angle.
      End rich/corporate welfare!

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  8. I saw this on the boob tube also.
    Let the constitution be the law! It’s not even “murky” wording.
    Ignore the Tea party idiots and their Republican schills.
    Put together a WPA type jobs program…..and get on with it.

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  9. sekanblogger |,

    ” I’m so sick of hearing about the poor mistreated rich people. ”

    It’s not a question of poor mistreated rich people . It’s a question of whether taking the money from people whom the capitalist system has rewarded, will help the poor unwashed such as yourself . I say it won’t . Bringing the rich down to your level has never worked . This is ‘ whatever works ‘. Prove to me that your Robin Hood philosophy works .

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    • Alan – I remind you for the gajillionth time that you are flat wrong when you say I (we, Dems, whoever) deny that we have an entitlement time bomb. Liberals are quite aware of the health care costs which are a bullet aimed right at us. First Clinton and then Obama moved to address this problem in a MODERN way. Not a 19th century way, whch is the Repubican way, hte Dicksonian way. “Are there no poor houses?”

      And capitalists uleashed are the scourge of mankind everywhre, as Adam Smith, who invented the damn philosophy well understood. If not well regulated, capitalism is deeply destructive.

      Stop with the “prove to me”. I don’t have to.

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  10. Ms. Holland ,

    ” Alan – I remind you for the gajillionth time that you are flat wrong when you say I (we, Dems, whoever) deny that we have an entitlement time bomb. Liberals are quite aware of the health care costs which are a bullet aimed right at us. ”

    You know you are right . I simply have a reading comprehension problem. I could swear you’ve said a ” gajillionth ” times that if Bush had not waged his wars, there would be no SS or medicare problem .

    ” Not a 19th century way, whch is the Repubican way, hte Dicksonian way. “Are there no poor houses?” ”

    Again , my comprehension lets me down . I did not think that allowing young workers to control 4 or 5 % of their SS contributions in 401 K types of accounts was Dickens economics , but I thank you for straightening me out . If I did not visit you here , imagine how misguided I would be .

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  11. [ I simply have a reading comprehension problem. I could swear you’ve said a ” gajillionth ” times that if Bush had not waged his wars, there would be no SS or medicare problem ]

    Don’t beleive that and never said it. So you remember wrong. I have gone after Bush for fighting wars on borrowed money and thus quadrupling the debt.

    As for SS, go ahead and beleive that GOP is trying to ‘save’ or ‘improve’ it. Then go check their party platforms for the last 30 years – they have always wanted to wipe it out. In the 1930’s Republicans decared it was the ned of the republic because SS was passed. Of course that was nearly 100 years ago.

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  12. Whether any of us like it or not it is all about the “obligations” that Congress over time has signed into law, not the bonds.

    The ceiling raise has nothing to do with future spending, only that which has already been committed to by this and prior sessions of Congress over out history.

    We elected them, they act via their Constitutional responsibility passes laws/funding programs, we own it and has the “full faith and credit” of the US behind it. These are all laws that then need to be upheld, ie honored.

    The Constitution is by definition the original document plus any and all Amendments to it so trying to separate the two is a specious argument as well.

    In PERRY V. UNITED STATES, 294 U. S. 330 (1935)SCOTUS addreses the larger context of debt as “obligations” that further supports the notion that default would be unconstitutional and thus stopping it would be required of the President:

    “…The government’s contention thus raises a question of far greater importance than the particular claim of the plaintiff. On that reasoning, if the terms of the government’s bond as to the standard of payment can be repudiated, it inevitably follows that the obligation as to the amount to be paid may also be repudiated. The contention necessarily imports that the Congress can disregard the obligations of the government at its discretion, and that, when the government borrows money, the credit of the United States is an illusory pledge.

    We do not so read the Constitution….To say that the Congress may withdraw or ignore that pledge is to assume that the Constitution contemplates a vain promise; a pledge having no other sanction than the pleasure and convenience of the pledgor. This Court has given no sanction to such a conception of the obligations of our government.

    The office of the President as “Chief Executive” is empowered by the Constitution that “he shall take Care that the Laws be faithfully executed”.

    He is also Constitutionally bound by his oath of office:
    “I do solemnly swear (or affirm) that I will faithfully execute the Office of President of the United States, and will to the best of my Ability, preserve, protect and defend the Constitution of the United States.”

    This creates a slippery slope for any President. In other words he has no choice in acting per the Constitution lest he violate his oath and for that could be subject to impeachment.

    A secondary argument, slightly less compelling, is that in his job as Commander in Chief to protect the nation against any threats could be cited here. A default that plunges the nation into another recession and costs the taxpayers hundreds of billions in additional Federal interest payments and billions more in higher credit card, mortgage and consumer loans threatens the nation as much as any war or attack does. Not acting would weaken the nation considerably and his failure to protect the nation from this sort of “attack” would also be seen as a failure to fulfill his oath.

    So the 14th/PERRY V. UNITED STATES makes it clear on the debt’s validity and the fact that it cannot be abrogated in anyway that diminishes the full faith and credit of the nation and its trust with any one owed money via a statute approved by Congress, be it your mom on SS, a cleaning contractor for a federal building or foreign nations holding bonds. All are equally valid and must be honored.

    So no action by Congress is illegal and the Debt Ceiling law in any dispute is trumped by the Constitution. In “Perry” Chief Justice Hughes wrote the majority opinion: “We do not so read the Constitution…the Congress has not been vested with authority to alter or destroy those obligations.”

    Altering those obligations means that the terms of meeting them cannot be changed in anyway so even a default of a few days or a program to pay bills in some order with revenues is not allowed. So inaction that allows any sort of modification is out of the question as well.

    If Obama does not act to avert the crisis if negotiations fail that is a more compelling reason to Impeach than trying to claim that he exceeds his Constitutional power in resolving the crisis using the 14th.

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    • Thanks HCR for taking the time to present such a thorough argument. I hadn’t considered the national security issue. I should have remembered that one – around the time of the Gov’t shutdown in the 90’s, someone – brass for sure – at the Pentagon, identified a shut down as a threat to national securitiy. I tried to google it up, but can’t find a citation. Just my memory.

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  13. OK…..I come late to this one….

    Let’s ALL remember something….
    Ronald Reagan got into the same mess here…
    We don’t have to go to Canada…

    He lowered taxes….
    Then carefully blinked and raised fee’s and taxes just about thru the roof!….
    And balanced things….

    The person here that said there needs to be cuts is CORRECT…
    Obama will sign off on some…
    But I’m willing to be there will be revenue enhancements, or what ever you want to call it also….

    It is simply batshit crazy for the GOPer’s to think there will be ONLY cuts….

    The argument about the debt ceiling not being the law is BS also….
    No Wall Street investor gonna swallow it….
    Nor is the rest of the planet…
    The argument is just another attempt to duck the issue….

    There WILL be some sort of agreemenet people….

    If there isn’t Obama should shut the mother down…
    Fold his hands across his chest and watch the GOPer’s heads boil under the fire of the media…

    This is America…..
    Land of the let’s make a deal….

    It’s the way the founding fathers set it up….
    The GOPer’s WILL deal;in the end…
    Wait and see….

    They already are mumbiling about revenue enhancements…….

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  14. He. he, he……
    NOT TAXES!

    Revenue enhancements please……

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  15. Pingback: The 14th Amendment Charade—or is it? « Civic Choices

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