A lot of hay has been made about this Trump statement, and that got me wondering whether anybody else has any say in whether the United States is planning to pay back its debt, as a practical matter.
SD?
So no, the President cannot unilaterally repudiate the debts of the federal government. Any creditor of the federal government has the right to sue in the federal court system for repayment of a debt owing.
See the wiki article on the United States Court of Federal Claims, which includes suits against the federal government for breach of contract:
Right, but what if a President said, “Yes, the debt is valid, but we just are not going to pay. Neener, neener.”?
Large number of *American *bond holders, and subfederal-level bond issuers, ticked off because he just downgraded or even downright junked the portfolios and caused a huge spike in interest rates (which in turn also socks it to regular pensioners and homeowners) begin writing letters and counting senators to add up to 67.
Oh, I agree. Apart from impeachment and removing the President from office, a default on our debt would trigger a worldwide depression that would almost put us back in the stone ages. I was just addressing the idea that we could not default on our debt because its “validity” may not “be questioned.” That leaves a lot of room for sneaky tricks.
The US Government has no legal basis to refuse to pay debts issued in accordance of law. Period.
Any “tricks” that violate the 14th Amendment are not legal. Perhaps the only caveat regarding repayment of debts would be if the treasury were literally empty with no funds to make payments, but that is a different scenario.
If that were to happen, the Treasury could raise more cash from the Federal Reserve, essentially devaluing the currency in order to pay its debts. That would also have dire worldwide consequences, but by the time we get to that point we’re pretty much boned anyway.
One assumes that all debts will have repayment schedules. Failing to meet them means you go into default. So you need to re-negotiate the repayment schedule. The world is rather used to this problem. But actually repudiating the debt itself is a very different matter.
My one sentence understanding is that the president has the authority to execute law. He does not have the authority to make law. So executive action that alters the execution of a law is all that is possible, including failing to action it. So, in the extreme it might be possible for an incumbent president to order the non-payment of debts on schedule. He could keep this up until impeached or his term expires. It would be for his successor to work through the mess, but the debts would still be there.
The offhand Trump statement* has two constitutional problems. Most attention focuses on the first, 14th amendment saying
“The validity of the public debt of the United States, authorized by law…shall not be questioned.”
but the other wrt president doing this unilaterally is Article 1:
“The Congress shall have power…to pay the Debts”
from which it follows pretty directly, to decide not to (fully) pay ‘the Debts’.
I don’t think you can say 100% that the 14th amendment would be found by courts to preclude any deal ever where the US govt required creditors to take less than 100 cents on the dollar. That pretty clearly wasn’t the specific intent of that statement in its context, but rather to distinguish USA debt, some of which was incurred during a war where the seceding states argued the ‘union was dissolved’, from CSA debt:
“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”.
Lawyers can argue, ‘but it still says what it says’ in the first sentence of Section 4 of the amendment, and maybe have the USSC overturn any future renegotiation of US debt with creditors (even passed in both houses and signed by the president). But maybe not. Like any such, it would depend on the justices hearing the case, and nobody is going to ‘win’ that argument on the internet now.
Again, the problem in Article 1 seems more fundamental for a president renegotiating unilaterally. That article was clearly aimed at defining Congress’ power wrt the debt.
*which I wouldn’t give much specific weight to, though it is part of a general problem of his lack of knowledge, saying whatever comes into his head and constantly contradicting himself. That could cause serious problems as president IMO, but I don’t there’s much actual likelihood Trump is particularly attached to renegotiating the debt. And the eventually coming (IMO, on the current path) fundamental US fiscal crisis is probably farther off than 8 yrs, very likely more than 4, even with deficit increasing policies the next 4 yrs. The Paul Krugman type view ‘don’t worry about the debt no matter what’ (which should not suddenly change if a Republican is in the WH) is probably right for awhile longer, I just dispute that it will always be.
It would violate the text of the 14th Amendment. But to be realistic, people violated the text of the 14th Amendment for a hundred years after it was enacted. People can do something unconstitutional as long as other people allow it to happen.
But I don’t think that would happen in this case. All of the people in the government who are smarter than Donald Trump would realize the enormous and terrible consequences that would follow from any attempt to repudiate the national debt. So they would stop any attempt by means up to and including impeachment.
Faced with this opposition, President Trump would pout and bluster. And then he’d declare that he never wanted to repudiate the debt and that he accomplished a great victory by not doing so.
Theoretically, the US Executive can do anything it wants, including suspend the entire Constitution, just by proclaiming an “emergency”. But it might have to overcome resistance from the Congress, the Supreme Court, the Cabinet, and, if it came down to who has the clout, everyone in the Defense Department below the Commander in Chief.
Yes, I too agree he cannot unilaterally decree the debt to no longer exist, he may at most declare an emergency that requires stopping the payments, but then he’d have to deal wth Congress and the Courts.
And if Congress and the Courts say “POTUS is on this subject FOS, the Treasury is hereby ordered to resume payments” then barring (or pending) impeachment it would be in the short term a matter of how likely is it the Executive Branch obey Congress/SCOTUS rather than their own chain of command? The leaders of the Executive can’t fire *everyone *for insubordination, but the experience is that much sooner rather than later you *will *get down to an official who *will *relay the constitutionally questionable instruction, and many line employees who’ll say “I just work here, I’m not the decision maker”.
One thing to keep in mind is that the dollar is worth a dollar only because everyone agrees that it is worth a dollar. In the old days, you could take a dollar and redeem it for a certain amount of gold. That hasn’t been true in a long time. There’s nothing backing the dollar.
So if you want to get rid of our debts, all you have to do is have the treasury department print up a few trillion dollars and pay it. There. Your debt is gone.
Anyone with half a brain’s worth of economic sense wouldn’t do that, because if other countries see that this is how we pay our debts then they think our dollar is worthless. And since our dollar is only worth what everyone thinks it is worth, that would cause us some huge headaches in the global economy. And since we have intentionally tied ourselves into the global economy by outsourcing most of our manufacturing, the results would be disastrous for us.
So theoretically the President could make the debt go away just by paying it, but he’d be a fool to do so.
I agree if restated as just ‘constitutional is what courts say it is’.
However I’d still contrast the debate about meaning of the last sentence of Section 1 of the amendment, “nor deny to any person within its jurisdiction the equal protection of the laws”, which is what most controversial 14th Amendment decisions revolve around, with the case of debt. The more common case is just defining what ‘equal protection’ means (‘separate but equal’?, race based preferences in admission and hiring?). There is no other context in the amendment itself implicitly limiting the concept.
In contrast Section 4 in entirety
“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.”
is speaking of the comparative validity of United States govt debt, particularly as incurred to meet liabilities of a war during which the union was arguably dissolved, with CS debt. It can be interpreted as simply clarifying that secession was irrelevant to the validity of US debt, but the settlement of the war completely invalidates Confederate debt. It’s more reasonable to limit that statement to a particular context. Besides which ‘validity’ like ‘equal protection’ doesn’t have one meaning over time to everyone.
I think this is influenced by talking points type ideas of the 2011 stand off, as well as the concept of Trump unilaterally doing it, which Article 1 of the C seems to more comprehensively disallow.
Imagine ‘the good guys’ controlled WH and Congress and determined in a future fiscal crisis that some kind of semi-explicit hair cut was the ‘fairest’ way to deal with an unmanageable debt load, rather than the side effects of deliberate inflation or direct monetization (Fed just buys up the debt). Imagine their solution was a bill passed by both houses of Congress and signed by the president which did the following: required creditors to swap existing bonds for ones of the same face value and coupon, ie in political and man-in-the-street terms ‘those (mainly well off so and so’s) still get all their money back (which they don’t even deserve)’, but the maturity is extended 15 yrs (IOW big haircut in market value terms). Assume also ‘good guys’ have a majority on the USSC and find the law constitutional. On what solid basis could you call that a ‘violation’?
But a certain amount of gold is also worth what is because everyone agrees that that’s what it’s worth. Trading one artificially valued item for another artificially valued item doesn’t reduce the fictitiousness of its value.
Ok, in reality it probably does because in reality more people agree on the value of gold than on the value of a piece of paper, but in principle it’s the same thing.
–Mark
So which sovereign countries holding US debt does such a law have sway over? All well and good to hammer those US citizens holding debt, but that isn’t what Trump is saying he will do.
If the system is unified in doing things that are against the plain text of the Constitution, such as allowing the Government to refuse to honor lawfully authorized debt, then there is no legal recourse. But that does not mean that the plain text of the Constitution allows for extra-legal decisions such as this, and I’m sure future generations would look back and recognize that the United State abandoned the rule of law in such a case.
If the US has the the power to freeze bank accounts held in non-US banks, it presumably also has the power to “freeze” the legitimacy of any debts and hold them ineffective in perpetuity.
No. See the 14th Amendment.
If I owe you $100 and call you on the phone and say that I just lost my job and can’t pay my bills, but I will pay you $50 as full settlement of my debt, did I question the validity of my debt?