What is Section 4 of the 14th, “The validity of the public debt of the United States?”
14th Amendment to the U.S. Constitution: Civil Rights (1868) | National Archives, Section 4.
“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.“
There is history to this amendment written after the Civil War in 1866. New York Times has an article on the whys of Section 4 of the 14th Amendment. Then I will phase into the latest coming from Letters from an American for a history lesson.
Citizens preferred to be paid back in gold rather than in paper currency (which were used to buy the bonds) for the five-twenties bonds used to fund the Civil War. The reasoning for preferring gold was the Green-Back paper currency had deteriorated considerably in value. However, there was no rule stating the bonds would be paid back in gold. If such had occurred, it would result in an enormous and unearned windfall for banks and large investors who had purchased bonds with greenbacks to receive gold back from the government.
A Guest Essay on the Opinion page of the NYT. January 2023 explains the issues involved about the national debt when the 14th Amendment. “The Constitution Has a 155-Year-Old Answer to the Debt Ceiling,” author Lenny Holston explain the sections of the 14th Amendment and Section 5.
“The nation needed to be made “safe from the domination of traitors,” declared Representative James Ashley, Republican of Ohio, “safe from repudiation.” The 14th Amendment would help accomplish these goals. Whatever one thinks of Civil War-era fiscal policy, the amendment’s language is mandatory, not permissive — the validity of the public debt “shall not be questioned.” Today, over a century and a half after the amendment’s ratification, this promise is no longer considered an “extraordinary guarantee”; it is an essential attribute of a modern economy.
Our Constitution is not self-enforcing. The 14th Amendment concludes by empowering Congress to carry out its provisions. But if the current House of Representatives abdicates this responsibility, throwing the nation into default by refusing to raise the debt limit, President Biden should act on his own, taking steps to ensure that the federal government meets its financial obligations, as the Constitution requires.“
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May 2, 2023, Letters from an American, Prof. Heather Cox-Richardson.
Prof. Heather explains the events leading up to the inclusion of Section 4 of the 14th Amendment
The debt ceiling crisis continues to dominate the news, with some speculation now that White House officials are wondering whether the Fourteenth Amendment to the Constitution might require the government to continue to pay its bills whether Congress actually raises the debt ceiling or not.
The fourth section of the Fourteenth Amendment reads: “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.”
This statement was a response to a very specific threat.
During the Civil War, the U.S. Treasury issued more than $2.5 billion in bonds to pay for the war effort. To make those bonds attractive to investors, Congress had made most of them payable in gold, along with their interest. That gold backing made them highly valuable in an economy plagued by inflation.
In contrast, most working Americans used the nation’s first national currency, the greenbacks, introduced by Congress in 1862 and so called because they were printed with green ink on the back and black ink on the front—as our money still is; check out a dollar bill. Because greenbacks were backed only by the government’s ability to pay, their value tended to fluctuate. As Congress pumped more and more of them into the economy to pay expenses, inflation made their value decrease.
National taxes funded the bonds, which meant that workers whose salary was paid in the depreciating greenbacks paid taxes to the government, which in turn paid interest to bondholders in rock-solid gold. After the war, workers noted that inflation meant their real wages had fallen during the war, while war contracts had poured money into the pockets of industrialists.
Workers couldn’t do much about the war years and still faced years of paying off the wartime bonds. They began to call for repaying war bonds not in gold but in depreciated currency, insisting that taxpayers should not be bled dry for rich bondholders. Democrats, furious at wartime policies that had enriched industrialists and favored bankers, promised voters that if voters put them in control of Congress, they would put this policy into law.
Republican legislators who had created the bonds in the first place were horrified at the idea that Democrats were claiming the right to change the terms under which the debt had been sold. This, they said, was “repudiation” and would turn those who had invested in the United States against it.
Bonds were about far more than just money. When the war broke out, the Treasury had turned to bankers to underwrite the war. But the bankers were notably reluctant to bet against the cotton-rich South and refused to provide the amount of help necessary. To keep the government afloat, Treasury officers had been forced to turn to ordinary Americans, who for four years had shouldered the financial burden of supporting their government. Treasury Secretary William Pitt Fessenden wrote to the public in 1864 . . .
“It is your war. Much effort has been made to shake public faith in our national credit, both at home and abroad…yet we have asked no foreign aid. Calm and self-reliant, our own means thus far have proved adequate to our wants. They are yet ample to meet those of the present and the future.”
On April 3, 1865, the day the Confederate capital of Richmond, Virginia, fell, bond salesman Jay Cooke hung from his office window a sign that featured the nicknames of the two most popular bond issues, along with an even larger banner that read:
“The Bravery of our Army
The Valor of our Navy
Sustained by our Treasury
Upon the Faith and
Substance of
A Patriotic People.”
The debt was a symbol of a newly powerful national government that represented ordinary Americans rather than the elite enslavers who had controlled it before the war.
“There has never been a national debt so generously distributed among and held by the masses of the people as all the obligations of the United States,” wrote an Indianapolis newspaper in 1865. “This shows at once the strength of popular institutions, and the confidence the people have in their perpetuity.”
Undermining the value of U.S. bonds was an attack not just on the value of investments, but on the nation itself. When Republican lawmakers wrote the Fourteenth Amendment in 1866, they recognized that a refusal to meet the nation’s financial obligations would dismantle the government, and they defended the sanctity of the commitments the government had made. When voters ratified that amendment in 1868, they added to the Constitution, our fundamental law, the principle that the obligations of the country “shall not be questioned.”
The fourth section of the Fourteenth Amendment reads: “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.”
This is the basis for insisting that The US guv’mint must pay all of its debts, period.
To the extent that, as Geo Bush Jr declared the ‘Constitution is just a piece of paper’, the modern GOP, which is more than willing to go along with Bush, declares this clause in the fourth amendment to be useless. null and void, alas.
Nullification – the 10th Amendment
Fathers of the Bill of Rights, Madison & Monroe, included the 10th Amendment to permit (supposedly) the right of a US state to invalidate federal laws they disagreed with. (This had much to do with the persistence of slavery in the US.)
The modern GOP, which claims descent from Jefersonian/Madisonian ‘states-rights’ politics, has gone them one better by apparently asserting that the Congress can also ignore certain laws as it sees fit. This is not a state ‘nullifying’ law, rather it’s the federal guv’mint nullifying federal law. A dangerous precedent, some would say.
Make that Madison & Jefferson.
During the Obama administration, Sec. 4 of the 14th Amendment was considered as a solution to the Republican blackmail via the debt limit legislation and was rejected by Obama who said that his constitutional law professor at Harvard, Lawrence Tribe, had advised against it. Now that same professor has changed his mind and President Biden and his staff know that. Should Biden decide to invoke it, it could be challenged in the courts but, as some have pointed out, it is difficult to see who would have standing to press the case under current Supreme Court rulings on standing. In the event that the court were to conjure up standing for someone or some entity, and rule against the administration, the administration could essentially tell the court to go pound sand as Andy Jackson did when John Marshall’s court ruled that he couldn’t displace the Cherokees from their land. Without administration cooperation, there was no-one to enforce the court’s order, leading to reports of Jackson having said, “John Marshall has issued his order; now let him enforce it.” Would Joe Biden have the guts to do that? We may find out. I, for one, hope he does it. The debt ceiling is utterly irrational as an act of the body (the House) that appropriates in the first place.
I have to think that much of the damage to the US and world economy which a default occurred would be only slightly lessened if the US relied on the 14 th Amendment to keep issuing debt including soaring interest rates and the sale of treasuries at large discounts. Suspect there would be a lot more bank failures and I would certainly not extend credit on the thought that Biden could tell SCOTUS to pound sand. The Dems really failed the country in December and now the crazy caucus of the GOP is steering the ship with the most impotent Speaker in my lifetime. At least Boehner had the decency to quit. This is just not going to end well and there will be no going back once the car goes over the cliff.
How did the Dems fail the country in December?
A lot of people were predicting exactly this crises and were urging the House to raise (or eliminate) the debt ceiling in the lame duck. Of course, it may not have gotten through the Senate but I am guessing it would. The Dems did not do that figuring that the GOP would not commit suicide. Many of us disagreed to the point of writing to Democratic leaders and here we are
You don’t think it would have been filibustered in the Senate? Or you think it was at least worth a shot?
This shouldn’t even be happening, it’s made up, it’s bullshit.
Try that your credit card: max it out then refuse to pay.
Mint the Coin …
A Few Ways Out of the Debt Ceiling Mess
NY Times – Paul Krugman – April 18
… There are several options. Moody’s Analytics seems to think that the Biden administration might simply ignore the debt limit, invoking the 14th Amendment to the Constitution, which says that the validity of U.S. public debt “shall not be questioned.”
Another possibility is the famous platinum coin. U.S. law allows the federal government to issue commemorative platinum coins in any denomination it chooses; so it could in principle mint a coin notionally worth, say, $3 trillion, deposit it at the Federal Reserve and pay its bills by drawing down the account thereby created. (The Fed would offset any effect on the money supply by selling off some of its large portfolio of U.S. government bonds, so this would in effect simply be borrowing through the back door.)
Yet another possibility would be to issue “premium bonds.” These are bonds that offer an unusually large “coupon,” i.e., annual interest payment, relative to their principal, the amount they pay when they come due. The Treasury could auction off these bonds for substantially more than their face value, in effect borrowing without increasing the official size of the debt.
All of these plans have drawbacks, and considered in isolation they each sound a bit silly. But they should be graded on a curve — compared not with normal fiscal management, but with the catastrophic consequences if the U.S. government simply stops paying its bills. …
Doing Whatever It Takes on Debt
NY Times – Paul Krugman – May 4
The United States is barreling toward a debt crisis; the possibility of default on U.S. debt is already beginning to roil markets.
What’s odd about this potential crisis is that it has nothing to do with excessive debt. Maybe you think the federal government has borrowed too much over time. We can argue about such things. But they’re beside the point right now. America in 2023 isn’t like, say, Greece in 2009 or Argentina in 2001, cut off by investors because they have lost faith in our solvency.
Our looming crisis will, instead, be entirely self-inflicted — or, more accurately, Republican-inflicted. If it happens it will be because the party controlling the House refuses to raise the debt ceiling, a quirk of the U.S. budget process that lets Congress prevent the government from making payments that have already been approved through past legislation. …
Here’s how budgeting is supposed to work: Congress passes bills that set tax rates and determine spending, which become law if the president signs them. Much of the time the legislated spending exceeds revenue, so the government must borrow to cover the difference. So be it. But under a quirk of U.S. law, with complicated origins, Congress must vote a second time to authorize the borrowing required by its own previous votes.
What would it mean if Congress refused to authorize that borrowing, that is, refused to raise the debt ceiling? It wouldn’t be a way to restrain spending. It would, instead, amount to preventing the president from making payments Congress has already mandated. It would be like buying a bunch of home furnishings, taking delivery, then refusing to pay the bill.
And it would be hugely destructive.
A new report from the White House Council of Economic Advisers lays out potential costs from a default induced by Republican refusal to raise the debt ceiling. The analysis suggests that a protracted default could cost eight million jobs as a result of shocks to consumer and business confidence, increased interest rates on U.S. debt (which investors would no longer consider safe) and drastic forced cuts in government spending.
Even these projections may understate the likely damage. Until now, the world has viewed U.S. government debt as the ultimate safe asset; as a result, Treasury bills play a crucial role as collateral in many financial transactions. Make these bills unsafe — I.O.U.s that the U.S. may not honor — and the whole global financial system could freeze up.
In fact, this almost happened for a few days in March 2020, and it’s not clear whether a rescue could be engineered in today’s political environment. …
So what can be done? Let’s not make a deal: Republicans are effectively engaged in a fiscal version of Jan. 6, using the threat of destruction in an attempt to exert total control even though voters gave them only one house of Congress.
President Biden shouldn’t give in to extortion, let alone make any deal acquiescing to demands of the extremists who control the House G.O.P.
It’s possible that Biden could simply declare that he must implement duly enacted fiscal legislation and that a debt ceiling that prevents him from doing so is unconstitutional.
Beyond that, there are those gimmicks. Yes, they would be gimmicks. I don’t have space to explain premium bonds, but they would involve playing games with the definition of “debt.” As for the platinum coin, the law allowing the government to mint a trillion-dollar coin was never intended as a way to bypass debt-limit extortion — but the debt limit was never intended to provide a mechanism for extortion, either.
And there are no significant economic downsides to using these gimmicks. I’ve been shocked to see people who should know better, including mainstream media outlets, report as fact the myth that, say, minting the coin would be inflationary. It wouldn’t; it would simply be a backdoor way to continue normal financing, bypassing the letter of a debt ceiling that shouldn’t exist in the first place.
I’m not sure what specific approach the Biden administration will adopt. But the guiding rule should be to do whatever it takes to get through this — whatever it takes, that is, other than giving in to extortion.