Live Q&As

No, this is Section Four of the Fourteenth Amendment, which says that "[t]he validity of the public debt of the United States, authorized by law . . .shall not be questioned."

Probably nobody.  It is very unlikely that this ever would reach a court.  If a default does occur, though, then the bondholders might be able to sue for damages.

I think that the Treasury would first have to sell its liquid assets (for example, the gold in Fort Knox or our holdings of foreign currency).  The issuance of new debt could only occur if those reserves run out.

Impeachment is probably the only remedy if Congress thought that the President had acted unlawfully.  Though you can bet that people will also make a big deal about that in next year's campaign.

Not even a gentleman's C? :)

Well, the Fourteenth Amendment prohibits Congress from defaulting on our debt.  So if all other funding is exhausted (a highly unlikely event), then something has to give.  Either the President must let Congress to break the law, or he must issue debt on his own authority and take the consequences.  Not a fun choice, I admit.

I think this is what would happen.  This, by the way, would effectively give the President the power to impound money, which Congress says he cannot do.  That's another puzzle, though you could say that the Fourteenth Amendment trumps the Budget Act.

Luckily for people who are shorting bonds or buying credit default swaps on the United States, nothing.

This is a good point, though the best reading is that this means authorized by law at the time the debt was issued.  If a new law could "deauthorize" existing debt, then the provision would be pretty meaningless.

Well, the debt ceiling just closes off an important way of paying for the authorizations.  There are other sources of revenue (incoming taxes and selling assets) that can work for a while.  The constitutional problem only kicks in when those resources are insufficient.

Bluffing that he would invoke this provision is one thing. Doing it is something else.  Who knows what he's saying privately.

Well, Presidents have invoked the Commander-In-Chief Clause to do things not authorized by Congress.  Harry Truman, for example, tried to seize the steel mills during the Korean War and was smacked down by the Supreme Court.

A narrower interpretation of Section Four would be that a temporary suspension of debt payments that is made good to the bondholders does not question the validity of the debt. I don't think that's right, but I must admit that I'm not certain about that. 

You would have to get the Federal Reserve to agree, but, in theory, yes.

Worse still, they could be voted out of office next year.

You're right.  Nothing gives the President the power to spend money on things other than bond obligations (interest and principal).  Lots of other government "promises" went unfulfilled during the 1995 shutdown, but nobody thought that was unconstitutional

Well, it will probably lead to some increase in interest rates, though it's hard to say how much.

It is so long as there is no default.  Somebody should try to figure out how long the Treasury could fund our debt by selling liquid assets (i.e., what does our balance sheet look like?).

I don't accept your description of those Justices, but this will never come to the Court anyway.

I think the better option would be for Congress to at least raise the debt ceiling to authorize the issuance of new debt to make payments on the existing debt.  A fire sale on national assets is a bad idea, though I'm sure the naming rights for Yosemite ("presented by Tostitos") would command big bucks.

Not like this.  The closest example was in the 1930s, when we devalued our debt by going off the gold standard.  The Supreme Court (in an opinion by only four Justices) said that this violated the Fourteenth Amendment, but they came up with a convoluted reason why the bondholders were entitled to nothing.  

The last part of what you said is my view.  The debt ceiling is unconstitutional only if there is no other way to pay our debt. That's an important fact that the Treasury should assess.

I think that they will reach a deal before August 2nd. Otherwise, they'd miss their summer vacation.  I think that's actually a more powerful motivation that anything else.

Because nobody would have standing to challenge a unilteral presidential action.  The only remedies are impeachment or voting him out next year.

Right you are!  The bondholders can be stripped of their right to sue by Congress.  At present, though, they probably still have that right.

That's right.  I know there is an argument that any authorized spending (not just bond payments) are covered by Section Four of the Fourteenth Amendment, but I think that's wrong.

We've have to pay higher interest rates in the future.  That's why the Greeks are so desperate not to default.

I don't think that there is enough actually, but if there is then there's no constitutional problem.

Some people have wondered whether the President would have the authority to unilaterally raise taxes.  (After all, if you think he can issue debt as a last resort, why not raise taxes?) That doesn't seem right, though, does it?

Probably none.  Members of Congress generally do not have standing in this sort of situation.  On the other hand, the force of public opinion might compel the President to stop.

Because the Treasury can meet the authorizations in other ways.  Plus, an authorization has no special constitutional status -- debt payments do.

Well, I guess the Bush v. Gore precedent is a warning that you can never say never.  But I doubt that the Justices would want to get involved in fundamental budget questions.

I don't think an Act of Congress prohibits the "printing money" solution though.