14th Amendment Does Not Prevent Debt Default
by P.A. Madison on July 8th, 2011
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. —Section 4 of the Fourteenth Amendment
If I understand the argument currently circulating around the web correctly, the debt limit is unconstitutional under §4 of the Fourteenth Amendment because the failure to service (borrow/pay) public debt would bring the validity of it into question. This does not strike me as having any connection with the textual history behind this section.
After the Civil War, there was great apprehension over such things as confederate war claims, rebel debt and concerns over future actions by members of Congress from former rebel States who might endeavor on a strategy to impair the obligations incurred in suppressing the rebellion, such as Union soldier pensions. Such concerns are illustrated in a House resolution by Samuel J. Randall of Pennsylvania on December 5, 1865, where it was approved by a House vote of 162 to 1:
Resolved, (as the sense of this House,) That the public debt created during the late rebellion was contracted upon the faith and honor of the nation; that it is sacred and inviolate, and must and ought to be paid, principal and interest; and that any attempt to repudiate, or in any manner to impair or scale the said debt, should be universally discountenanced by the people, and promptly rejected by Congress if proposed.
This resolution was the foundation for incorporating §4 into the Fourteenth Amendment. When the adopted language of the fourth section cleared the Senate and sent to the House for approval, House and Reconstruction leader, Thaddeus Stevens, described its objective as identical with the above resolution as rendering “inviolable the public debt and repudiates the rebel debt.”
To make a long explanation short, the first sentence of the fourth section commands that no Congress may bring into question the validity of public debt authorized by law with intent to impair it. I doubt a case can be made of defaulting on payment of public debt because of either lack of revenue, a debt limit or, even lack of credit to continue borrowing to pay the debt, raises to the level of willful repudiation against authorized debt. In other words, defaulting on debt payment due to financial considerations is not the same as an act of Congress to repudiate any debt.
UPDATE: More historical background can be found on Jack Balkin’s blog here.
UPDATE: What would be an example of repudiating, or calling into question, the public debt?
A great example would be the State of Mississippi’s $5,000,000 banking bonds issued in 1838. The State could not afford to pay the debt and was unwilling to issue more debt for repayment. This lead to the governor requesting the legislature to call into question the validity of the debt on grounds of “fraud and illegality.” The legislature refused, allowing the bonds to fall into default where they remained for a future legislature to resolve.
UPDATE: Budgetary restraints in servicing debt due to revenue shortages is not the same thing as Congress calling into question the “validity” of any portion of the public debt. Financial difficulties or the desire to repudiate the debt in order to avoid having to make future payouts are two different things.