Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Financial Planning > College Planning > Student Loan Debt

Debt Limit 'Unconstitutional,' Say Democrats; 'Crazy Talk,' Says a Republican

Your article was successfully shared with the contacts you provided.

As the clock ticks toward potential default, Congress, still sparring over whether a deal can be reached to increase the debt limit, is facing a new debate. Last week Democrats began talking about the possibility that the debt limit itself is unconstitutional.

They cited Article 6 of the 14th amendment of the Constitution, which says, in part, "All Debts contracted and Engagements entered into . . . shall be as valid against the United States under this Constitution, as under the Confederation." On Sunday, Sen. John Cornyn, R-Texas, termed the idea "crazy talk" on Fox News Sunday.

The article itself, according to the Huffington Post, refers to debt incurred by the federal government, and was included in the post-Civil War amendment to reassure markets that Washington would pay its debts—although not the debts incurred by the Confederacy. However, the Supreme Court in 1935 upheld it as referring to all debt incurred by the federal government in a case concerning a bond issue.

In Perry v. U.S., the majority wrote, "While [the 14th Amendment] was undoubtedly inspired by the desire to put beyond question the obligations of the government issued during the Civil War, its language indicates a broader connotation. We regard it as confirmatory of a fundamental principle which applies as well to the government bonds in question, and to others duly authorized by the Congress as to those issued before the amendment was adopted. Nor can we perceive any reason for not considering the expression 'the validity of the public debt' as embracing whatever concerns the integrity of the public obligations."

It further said that Congress did not have the authority to undermine the full faith of the government, upon which it borrows. Chief Justice Charles Evans Hughes delivered the opinion, which continues, "To say that the Congress may withdraw or ignore that pledge is to assume that the Constitution contemplates a vain promise; a pledge having no other sanction than the pleasure and convenience of the pledgor. This Court has given no sanction to such a conception of the obligations of our government."

Now Democrats have seized upon it as a means to avoid the standoff on the debt limit, with Sen. Patty Murray, D-Wash., saying that it changes the context of the argument and refocuses it upon paying bills already incurred and not upon expenses yet to be determined: "The way everybody talks about this is that we need to raise the debt ceiling. What we're really saying is, 'We have to pay our bills,' " she said in the report.

Not everyone agrees. Cornyn expressed his opinion on Fox News Sunday, saying, "That's crazy talk. It's not acceptable for Congress and the president not to do their job and to say somehow the president has the authority then to basically do this by himself. We ought to sit down and work together." Democrats began discussing the possibility over the past couple of weeks, after Republicans pulled out of budget talks in a refusal to consider raising taxes.

Cornyn also said Sunday that raising taxes "during a fragile economic recovery" would be a disincentive for employers to hire workers.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.