In fact, scholarly research indicates that the original purpose of the framers of the clause was to place a constitutional bar to any attempt by Congress to repudiate or undo debt obligations that Congress itself has incurred. Default, in others words, is constitutionally prohibited by this clause. Yet in 2011, former President William J. Clinton asserted that the clause had an entirely different meaning. As the Treasury approached its congressionally set debt ceiling, he and other commentators argued that the Fourteenth Amendment’s debt clause means that the Treasury does not need congressional authorization to continue to borrow. This clause, they argued, mandates any and all means to avoid defaulting on the public debt. In other words, the president could unilaterally borrow without congressional authorization.
Others responded that Congress’s power under the Spending Clause (Article I, Section 8, Clause 1) could not be circumvented in that way. Rather, they asserted that this clause prevents the president and the Congress from threatening default. The clause affirmatively requires that the federal government pay its debts, even if that means that it has to take extraordinary measures to reduce expenditures and borrowing to do so. President Barack Obama indicated that he did not support Clinton’s view.
Outside of the Supreme Court’s brief consideration of the issue in The Gold Clause Cases, the federal courts have shown little interest in fashioning a judicial method for enforcing the limitations required by the clause. At the present time, this clause remains but an historical artifact of the post–Civil War era.
The Heritage Guide to the Constitution
The debt limit, or debt ceiling, is a restriction on how much the federal government can borrow to pay its bills and allocate funds for future investments. When Congress appropriates or directs government money to be spent, the government is obligated to pay those funds, creating a bill it must pay.
This bill, also known as the national debt, is the amount of money the federal government has already borrowed to cover outstanding expenses in past fiscal years. The national debt is composed of debt held by the public in the form of government securities and intragovernmental debt, debt which one part of the federal government owes to another.
WHAT COULD HAPPEN?
This has never happened before so it is not entirely clear, but it would cause major economic damage.
The government would no longer be able to pay the salaries of federal and military employees, and Social Security cheques – payments that millions of pensioners in the US rely on – would stop. Companies and charities that count on government funds would be in peril.
If the government stops making interest payments on its debt, that would also put the country into default. The US briefly entered default in 1979, which the Treasury blamed on an accidental cheque processing issue, but an intentional default would shock the financial system where more than $500bn in US debt gets traded every day.
Moody’s Analytics predicts that in a prolonged stand-off, stock prices would fall by almost a fifth and the economy would contract more than 4%, leading to the loss of more than seven million jobs.