U.S. Cannot Constitutionally Default on Its Debt, Says Constitutional Scholar
(CNSNews.com) - The United States cannot constitutionally default on its existing public debt even if the debt ceiling is not raised, constitutional scholar and attorney David Rivkin said during a Federalist Society news event. Instead, he said, the country should focus on the fiscal responsibility of new borrowing.
“The United States, to put it more clearly, is one of the few countries in the world that is technically incapable of defaulting on its public debts, so we cannot have a situation like in Greece or Portugal or Ireland, ” Rivkin, co-chairman of the Center for Law and Counterterrorism, said during a telephone conference call sponsored by the conservative legal group on July 7.
Section Four of the 14th Amendment to the Constitution of the United States says that “[t]he 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.”
Under the 14th amendment and applicable case law, the government is not allowed to default on the public debt, according to Rivkin.
“It means the following: that the default on public debt which, indeed, if it would occur, would be quite horrific, is a misnomer. It cannot happen, it will not happen, even if no debt increase of any kind takes place,” he said.
Commenting on the amendment, Rivkin explained: “(The) language of the14thh amendment is pretty clear. It applies only to the true public debt of the United States. It does not apply to the wide range of common litigations, and that point ought to be emphasized because I think there has been quite a bit of confusion about it.”
In realistic fiscal terms, there is no need for the government to default on the debt--by failing to pay the interest it owes on that debt--because onging federal tax revenues far out-strip ongoing interest payments. So far this fiscal year (through July 11), for example, the federal government has brought in $1.647687 trillion in tax revenue, while needing to pay out $150.837 billion in interest on the debt.
Tax revenues this fiscal year, in other words, have outstripped the required interest payments by more than 10-to-1.
Hypothetically, to put itself in a position where it would have defaulted on the interest owed to bond-holders in this fiscal year, the government would have needed to decide to pay almost $1.5 trillion in other expenses first--and thus exhaust federal revenues--before it paid the interest on the debt.
Along with the 14th amendment, several Supreme Court decisions, including in the 1935 case Perry v. United States, have established that Congress cannot renege on its stipulated bond payments, Rivkin said.
As the majority opinion in Perry reads, “[b]y virtue of the power to borrow money ‘on the credit of the United States,’ the Congress is authorized to pledge that credit as an assurance of payment as stipulated--as the highest assurance the Government can give, its plighted faith.”
“To me, that suggests that the real issue in play is not, repeat, not the default on existing debt,” Rivkin said.
Ultimately, though, “[t]he real debate is whether or not new borrowing would be incurred and, if so, upon what conditions,” he added.
Rivkin called for an elimination of the debt ceiling, replacing it with a case-by-case determination.
“One of the things that I’m advocating--but that’s a policy argument, not a constitutional argument--is that you sidestep the whole debt ceiling entirely and you go to congressional approval on a borrowing-by-borrowing basis, which, by the way, has been the historic practice in this country until 1917,” he said.
Some questions have been raised about the debt ceiling because of statements by some members of Congress, including Republican presidential candidate Michele Bachmann, who have said they would not vote to increase the debt limit, which currently is $14.29 trillion.
Negotiations between President Barack Obama and congressional leaders of both parties have been ongoing, where discussions centered on proposals for spending cuts and tax increases to accompany a raise in the debt limit.
Obama meanwhile, said in his Twitter town hall last Wednesday: “I don't think we should even get to the constitutional issue. Congress has a responsibility to make sure we pay our bills. We've always paid them in the past. The notion that the United States would default on its debt is just irresponsible."