Monday, September 27, 2021

Section Four as an Anti-Default Rule

Gerard N. Magliocca

Here's another way to think about Section Four of the Fourteenth Amendment. The text, as read by the plurality opinion in Perry v. United States, denies to Congress or to the Treasury the power to default on our national bonds. What, though, does a "default" mean? It does not mean any haircut that bondholders might take. At some point a partial repudiation would constitute a default, but I'm not sure at what point.

Stepping back for a moment, you could argue that the President should invoke Section Four simply to create a case on the question of whether Congress can constitutionally impose a debt ceiling that would cause a default. (The debt ceiling itself is not the problem, as a hypothetical Congress could say the United States would adopt a pay-as-you-go model for paying off old debt.) The problem (and not a small one) is that any borrowing while such a case is pending would be legally uncertain. 


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