The Debt Limit and the Fourteenth Amendment

[a_new_machine]

So, with the shenanigans now going on in the budget talks, the fear of a looming debt limit crisis is growing. Those fears are quite real, and if no deal is reached, a default could have vast and serious consequences.

As a response, many (including Congressmen involved in the debt ceiling fight) have suggested that there is a constitutional bar on

Comments

[a_new_machine]

I think Perry is distinguishable, because it involves an active attempt by Congress to invalidate old debts. That was not an instance of default, but rather an attempt to discharge gold-based bonds by the abandonment of the gold standard. "We conclude that the Joint Resolution of June 5, 1933, insofar as it attempted to override the obligation created by the bond in suit, went beyond the congressional power." Perry v. United States, 294 U.S. 330, 355 (1935) (emphasis added). Nothing in there about default, but rather about repudiation.

[devil_ad_vocate]

Since politicians are experts at parsing every portion of the Constitution, I'm not surprised that it happens in every instance. Personally, I don't see how anyone could interpret "validity of the public debt... authorized by law...shall not be questioned" other than "it's a valid debt - pay it when it's due".

"..a default doesn't question the validity of the debt." No, it just means a country that does it is a flake, can't be trusted, and has no business being regarded as a world leader.

You're right; it will never get to court. It ranks right up there on the judicial fear scale with interpreting the 2nd Amendment.

[a_new_machine]

Yeah man, and we all know SCOTUS will never go there...

[devil_ad_vocate]

... and it only took the SCOTUS a couple of centuries to address that issue.

[a_new_machine]

Not really. The Fourteenth is only about 150 years old, and before that the Bill of Rights didn't apply to states, period. And they still haven't applied the Seventh to states, so it's not like the Second was unique.

[underlankers]

Bah, the Republican Party that passed the 14th Amendment is a bunch of statist communists. ;P

[underlankers]

I might note that I think the whole debt ceiling fight is ludicrous in the first place. A debt ceiling that's perpetually raised is akin to putting fig leafs on Michaelangelo's David or the bald guy scraping two hairs over his head: the person doing that might be fooled but nobody else would be.

[rasilio]

The argument that failure to raise the debt ceiling equals default is nothing more than a political lie. What failure to raise the debt ceiling means is that government spending must immediately be cut to be no greater than government income. Which spending cuts occur are a matter of choice. In fact spending cuts are not even technically required as Congress could in theory pass a massive tax increase or sell off large quantities of government assets to allow spending to continue as before with no additional debt.

[tridus]

What, you mean we should stop buying $3 billion computer systems that don't work? That's crazy talk!

Seriously though, it's not necessarily a lie. If a bond issue comes due and there's no new issue, then when it's due you need to have the cash on hand to pay it out. It's not just a matter of matching revenue and expenses (though that really needs doing). But if there's no large payment due immediately and it's just day to day expenses, then yes they could immediately shut some things down and avoid a default. It really depends on how the debt is structured at the time the borrowing taps get cut off.

[malakh_abaddon]

Eh, whats the worst that can happen? We have to give Texas, California, and some other states back to Mexico. Will we sell Alaska to Canada or Russia? Will we have riots in the streets, with the elders of our society leading the charge?

Maybe it is for the best, that they drag their feet on doing whatever they are going to do with the debt limit.