As each attempt to reach a compromise on raising the debt ceiling falls apart, the situation seems increasingly like a car heading toward a cliff with one person being unwilling to turn the wheel while the other is unwilling to take their foot off the gas. In the hallways around the capital, a number of voices are starting to say “Why don’t we just declare the whole thing unconstitutional?” Senator Chris Coons of Delaware was recently quoted as saying “I don’t think, as of a couple weeks ago, when this was first raised, it was seen as a pressing option. But I’ll tell you that it’s going to get a pretty strong second look as a way of saying, ‘Is there some way to save us from ourselves?'”.
The 14th amendment. states:
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.
Or to put it another way, Congress has the power to approve spending and raise taxes, but it does not have the power to prevent the government from paying its obligations that Congress already approved. It is the financial equivalent of not being able to pass an ex-post-facto law.
Some contend that this is a perversion of the post civil-war amendment. The Union had gone into considerable debt to fund the Civil War. There was serious concern from U.S. bondholders and pensioners that the southern states or a southern president would hold the payment hostage to their own political goals. One such possibility involved tying the payment of Union War debts to the payment of Confederate War debts. Despite this background, the wording of the 14th amendment does not limit itself to Civil War debt. Neither is the language limited to paying treasury bonds, since it specifically mentions pensions and bounties for services.
Regardless of which side of the current standoff you favor, the fact that that there is a standoff at all calls into question our country’s ability honor its financial obligations, thereby putting an asterisk on the country’s ‘full faith and credit’. No other major country has a legislated debt limit. Congress’ budget and taxation authority provides it with the power necessary to control the growth of the country’s debt. If it is valuable to convince investors worldwide that out debt is rock solid, what better way would there be than to say “of course our bonds are absolutely safe: our constitution requires that we always honor them”.