The Debt Limit, The 14th Amendment, And The GOP

By: Karl Denninger
Market Ticker

For a Constitutional Scholar (Obama) he must have been asleep in class….

The 14th Amendment (in part) reads:

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.

Section 5. The Congress shall have power to enforce, by appropriate legislation, the provisions of this article.


First, what is a debt?  A debt is evidenced by some instrument.  In this case the instrument is a Treasury Bill, Note or Bond.  Whether the old-fashioned style with coupons around the edge or whether newfangled and electronic, the debt of the United States must be evidenced by a formally-issued instrument.

No other item is a “debt.”  A political promise is not a debt.  Even a law that has been passed is not a debt.  A law passed that has funds appropriated but which do not exist does not create a debt.

Only an actual issued Treasury Instrument is a debt.

Congress is given the power, explicitly to enforce all the provisions of this article (Amendment 14.)

So Congress has done so.  In doing so Congress has passed legislation that limits the ability of the Treasury to issue debt to a specific maximum amount.  Congress could also limit the composition (e.g. terms and types) of debt if it so decided, but it has not — that has been left to the discretion of Treasury.

The Executive has no authority to exceed that which Congress enabled, irrespective of what it may otherwise think.

However, The Executive is bound by The Constitution (and its Amendments) as is Congress.

Therefore, Treasury must pay the debts before all other bills, under The Constitution, as only the debts of the nation have preference as shown in The Constitution!

In fact there is no other place in The Constitution where preference is expressed for any particular appropriation.  Further, Congress is well within its powers to authorize spending without a companion or attached revenue bill to raise the funds necessary (via taxes, imposts and excises.)  There are plenty of examples where such an act might make sense (e.g. anticipated tax revenue that would exceed that originally expected, an accumulated Treasury surplus, etc.) but even if there are no funds Treasury is still constrained by the debt limit unless Congress exempts it from same.

Treasury Secretary Lew has recently threatened that he will not prioritize payments of Treasury instruments and interest should there be no increase in the debt ceiling.

This act, were he to do so, would be a black-letter impeachable offense committed by both him and Obama as the chief of the Executive branch.

Further, Treasury’s “extraordinary measures”, including the raiding of federal worker retiree funds in TSP accounts would be, if committed in a private context considered embezzlement.  Those funds held “in trust” for someone are not yours to use (temporarily or otherwise!)

I have wondered for quite some time why Obama, Reid and Pelosi have been screaming so loudly about not prioritizing and “causing” a default.  After all, it’s not a default if you cannot pay for every program that was appropriated.  You’re just not keeping your political promises, which may***** off voters but isn’t a default.  A default is exactly one thing — the non-payment of coupon or principal when it comes due.

Now I understand the reason — the 14th Amendment doesn’t empower The President to raise the debt ceiling on his own.

No, the 14th Amendment requires him to pay the interest and principal on Treasury Notes, Bills and Bonds before anything else should there be insufficient funds to cover it all.

John Boehner, it’s time you and the rest of the Republicans shove this fact right up Obama, Pelosi’s and Reid’s ass, making clear that (1) you will not raise the debt ceiling and (2) you will impeach that rat bastard if he fails to cover interest and principal as is required by The Constitution.

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